The information in this article is up to date for tax year 2022 (taxes filed in 2023).
The IRS is one of many government agencies working to ease the burden on those impacted by natural disasters by providing various forms of tax relief available to those in affected areas. Natural disasters of significant magnitude include earthquakes, hurricanes, floods, and wildfires.
Tax relief for victims of natural disasters
FEMA assigns a code to each disaster. If your client was affected by an event coded EM or DR, they might be eligible for relief under these conditions:
- Your client or their spouse lives in the disaster area
- The principal location of your client’s business is in the disaster area
- Your client’s tax records are located in the disaster area
If your client qualifies, the IRS will grant them additional time to file and pay certain taxes and to perform time-sensitive tasks like making contributions to retirement. The IRS will also waive the fee for requesting copies of prior–year tax returns.
Important: Certain federal agencies require applicants to submit tax information as part of their application process. To qualify for financial assistance, your clients must have filed all required tax return(s).
To request a copy or transcript of your client’s tax returns, use Form 4506, Request for Copy or Transcript of Tax Form.
What is deductible in the event of a natural disaster?
Clients who itemize can claim personal casualty and theft loss only to the extent that they are attributed to a federal disaster declared by the president and FEMA.
What does my client need to provide to deduct a loss for taxes?
To claim a casualty loss on your client’s tax return, use Form 4684 Casualties and Thefts. To support the loss claim, you will need to provide the following information:
- The type of casualty and when it occurred
- Was it a direct result of the casualty in a federal disaster area?
- Was your client the owner of the property?
- Photos, videos, receipts, diagrams, floor plans, county assessor records
This information will also help your client for insurance purposes.