With Hurricane and Flood Seasons Underway, Taxpayers Should Get Smart Now About Disaster-Related Tax Considerations
PARSIPPANY, N.J., July 22 /PRNewswire-FirstCall/ -- For Americans living in hurricane, flood or fire-prone areas, the summer season often heralds more than warm weather and family fun. The next few months mark the annual hurricane and flood seasons for large portions of the U.S.
According to the National Climactic Data Center, the U.S. has sustained 90 individual weather-related disasters over the past 29 years in which overall damages and costs reached or exceeded $1 billion*. Yet when it comes to coping with the destruction left in the wake of a natural disaster, Jackson Hewitt Tax Service((R)) notes that a little preparation can go a long way toward getting a family back on its feet.
"If you have suffered personal losses from a disaster such as a fire, hurricane, tornado, or flood, you may be able to make related deductions on your next tax return," said Mark Steber, Chief Tax Officer, Jackson Hewitt Tax Service. "Understanding the proactive steps you can take now, such as conducting a simple inventory of your home and possessions, is just one of the keys to being ready if a disaster strikes. While many of the steps we recommend are simple, they can help empower individuals at a time when they often feel most powerless."
The tips shared by Jackson Hewitt for when a natural disaster strikes include:
Know How "Casualty" is Defined: A casualty is the damage, destruction or loss of property resulting from an identifiable event that is sudden, unexpected or unusual. It does not include damage from routine wear and tear (such as termite infestation or gradual mold damage).
Know What's Not Covered: Several costs related to a disaster are not considered deductible losses, such as the cost of repairing damaged property, restoring landscaping to its original condition or cleaning up after a casualty. However, if these repairs meet certain conditions, you may be able to use these costs as a measure of the decrease in fair market value of your property.
Documentation is Key: To deduct a casualty loss, you must be able to prove to the IRS that you either owned the property or are contractually responsible to the owner for any damage to the property, and that there was an event that directly caused your loss. Saving items such as police reports, newspaper articles, photographs or videos, bills of sale, receipts for improvements or repairs, payment checks, deeds, professional appraisals, and copies of insurance claims or appraisals will help you to support any casualty loss deduction you take on your return.
"As a rule, keep any documentation validating things like ownership or the fair market value of your property separate from that property," advises Steber. "You can keep these copies with a family member or in a safe deposit box so they remain protected if your property is damaged or destroyed."
Be Aware of Federally Declared Disasters: If the president of the United States declares your area a federal disaster area, you may be entitled to additional tax relief. The Federal Emergency Management Agency (FEMA) reports that last year there were 75 federally declared disasters, with 38 so far in 2009.** Residents in official disaster areas may qualify for immediate tax relief.
Options for Filing a Claim: Personal casualty losses are reported on Form 4684, Casualties and Thefts, Section A and entered on Schedule A. In general, you must be able to itemize deductions on your federal return to be able to claim a casualty loss. But if you are in a disaster area and you do not itemize, you may claim your net casualty losses as an addition to your standard deduction amount.
Know Your Deadlines: The IRS may postpone certain tax deadlines of taxpayers who are affected by a federally declared disaster for up to one year. These deadlines may include filing income, excise and employment tax returns, paying taxes associated with those returns, and making contributions to a traditional IRA or Roth IRA. The IRS typically publishes announcements about postponed tax deadlines online at www.irs.gov.
Know Where to Go For Help: In addition to its online Disaster Relief Kit, Jackson Hewitt has offices open around the country throughout the year to assist taxpayers with questions surrounding casualty losses.
"Each situation is different, and there are a variety of rules that may apply," said Steber. "Speaking with a local tax preparer about your situation can help you to file properly and get reimbursed for applicable costs sooner."
Jackson Hewitt Tax Service Inc. (NYSE: JTX), with approximately 6,600 franchised and company-owned offices throughout the United States during the 2009 tax season, is an industry leader providing full service individual federal and state income tax return preparation. Most offices are independently owned and operated. Jackson Hewitt is based in Parsippany, New Jersey. More information may be obtained at www.jacksonhewitt.com. To locate the Jackson Hewitt Tax Service((R)) office nearest to you, call 1-800-234-1040.
