Hurricane Sandy has undoubtedly wreaked havoc on the eastern shore of the United States. While my New York family generally fared well in the storm, hundreds of thousands of folks have been displaced, are still without power or are sorting through waterlogged possessions. The impacted include small and large business owners who have seen payroll tax due dates come and go while they are sorting through the mess.
Thankfully, the IRS has issued several relief provisions related to Hurricane Sandy. The first was IRS News Release IR-2012-82 that extended the deadline for filing any returns and making payments due on October 31 until November 7, 2012. This relief included all taxpayers and tax preparers affected by the storm. The relief is automatic – meaning that the taxpayer does not have to file anything to get it. If a penalty is assessed, the taxpayer just needs to call the IRS and request penalty abatement due to the storm.
More specific relief was provided yesterday in IRS News Release IR-2012-83. Taxpayers in specific counties in Connecticut, New Jersey and New York have extended filing and payment deadlines. All payroll and excise tax returns due for the third and fourth quarters (normally due between October 31, 2012 and January 31, 2013) are due on February 1, 2013. Individual estimated tax payments normally due on January 15, 2013 will be due on February 1, 2013. All interest, late-payment or late-filing penalties applied will be abated automatically. The IRS is also waiving penalties for federal payroll and excise tax deposits due after October 30, 2012 through November 26, 2012 if the payments are made by November 26, 2012.
Additional relief was announced in IRS News Release IR-2012-84 related to qualified disaster relief payments. These payments made by an employer or any person can be excluded from the recipient’s taxable income. Qualified disaster relief payments include amounts used to cover personal, family, living or funeral expenses that are not covered by insurance. In addition, payments can be used to repair or rehabilitate personal residences or repairs or replace personal goods that were not covered by insurance. Because Hurricane Sandy is a qualified disaster, employer-sponsored private foundations may provide disaster relief to employees who are victims without losing their tax-exempt status.
This type of penalty relief is often issued after major weather events, however with the magnitude of the storm and its focus on a US financial capital, many taxpayers will take advantage of the extensions. It relieves stress by extending paperwork deadlines and deferring cash payments. This relief is critical to recovery efforts – offering a rainbow after the storm.