Wolters Kluwer Tax & Accounting looks at tax relief available to taxpayers for natural disasters and the COVID-19 pandemic
It’s been a busy year already for federal disaster and national emergency declarations. Following the declaration of a national emergency by the President in response to the COVID-19 pandemic, emergency declarations were issued on March 13, 2020 for all 50 states, five territories, 38 Native American tribes, and the District of Columbia. In addition, there has been a series of major disaster declarations for natural disasters: 15 for storms, seven for fires, two for flooding, one for Tropical Storm Cristobal, and one for an earthquake in Puerto Rico. Each of these declarations can have varying tax consequences arising from provisions of the Internal Revenue Code and from specific Internal Revenue Service (IRS) and Congressional actions.
Taxpayers need to be aware of the declarations for their area and the tax breaks available as a result of these declarations.
- There are tax differences between the declaration of a national emergency and a federal disaster under the Robert T. Stafford Disaster Relief and Emergency Assistance Act
- The casualty loss provisions of the Internal Revenue Code apply to federally-declared disasters
- Congress has enacted several pieces of legislation in response to the COVID-19 pandemic, including the massive CARES Act, that include a wide variety of tax relief measures
- The IRS has been extending tax-related filing and payment deadlines in response to the COVID-19 pandemic, with additions being made on an almost daily basis
- Congress frequently passes legislation providing additional tax breaks for specific major disasters or for federal disasters within a specified time scope, with the most recent action being taken in the Consolidated Appropriations Act, 2020, which was enacted in December 2019 and focused on disasters in 2018 and 2019
- Federal disaster relief commonly includes additional casualty loss provisions, penalty-free access to retirement accounts, increases in retirement plan loan limits, increases in charitable contribution limits, and employee retention credits
- The CARES Act added COVID-19 relief in the form of 2020 recovery rebates, temporary relief from required minimum distributions, an above-the-line deduction for charitable contributions in 2020, and a variety of business tax relief related to payroll taxes, net operating and business losses, business interest deductions, charitable contributions, and minimum tax liability
Tax expert Mark Luscombe, JD, LL.M, CPA, Principal Federal Tax Analyst at Wolters Kluwer Tax & Accounting, can help explain the tax relief available for federal disasters, including the COVID-19 pandemic.
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