Accounting for casualty losses during a national disaster.

• Author: Parker, Kenneth M.

Recently, accounting for disasters seems to be an annual event, with all the hurricanes, tornadoes and floods. The President has had to declare disaster areas numerous times, thus allowing for specialized accounting and exceptions to the rules.

General Tax Relief

During a national disaster, the IRS may postpone tax deadlines, under which the following are eligible for relief under the rules:

1. Any individual whose main home is located in the disaster area; see, e.g., IR News Release 2005-96.

2. Any business entity whose principal place of business is located in a covered disaster area; see id.

3. Any individual who is a relief worker affiliated with a recognized government or philanthropic organization and who is assisting in a covered disaster area; see, e.g., IR News Release 2005-103.

4. Any individual, business entity or sole proprietor whose tax records needed to meet a postponed deadline are maintained in a covered disaster area; see, e.g., IR News Release 2004-118. The main home or principal place of business does not have to be located in the covered disaster area.

5. Any estate or mast whose tax records needed to meet a postponed tax deadline are maintained in a covered disaster area; see, e.g., Notice 2005-82.

6. The spouse on a joint return with a taxpayer who is eligible for postponements; see id.

7. Any other person determined by the IRS to be affected by a Presidentially declared disaster; see id.

   Under Sec. 7508A, the IRS may postpone for up to one year certain tax deadlines for taxpayers affected by a Presidentially declared disaster. The deadlines the IRS may postpone include those for filing income and employment tax returns, paying income and employment taxes and making contributions to traditional and Roth IRAs; see Sec. 7508(a) (1). If deadlines are postponed, the IRS publicize the postponement in the relevant area and publish a news release, revenue ruling or other guidance in the Internal Revenue Bulletin. Generally, such guidance will also be set forth on the IRS's website, at www.irs.gov.

   The extension to file and pay does not apply to information returns, such as Forms W-2; 1098, Mortgage Interest Statement; 1099; 5498, IRA Contribution Information; 1042-S, Foreign Person's U.S. Source Income Subject to Withholding; or 8027, Employer's Annual Information Return on Tip Income and Allocated Tips, or to employment and excise tax deposits; see, e.g., IR News Release 2005-128. Taxpayers whose specific disaster-related...