As a result of the severe storms, tornadoes, and flooding in May and June, the IRS has declared that certain taxpayers who live or conduct business in fifty-six counties in Iowa – Adams, Allamakee, Benton, Black Hawk, Boone, Bremer, Buchanan, Butler, Cedar, Cerro Gordo, Chicksaw, Clayton, Clinton, Crawford, Decatur, Delaware, Des Moines, Dubuque, Fayette, Floyd, Franklin, Green, Hamilton, Hancock, Hardin, Harrison, Jasper, Johnson, Jones, Keokuk, Kossuth, Lee, Linn, Louisa, Madison, Mahaska, Marion, Marshall, Mills, Monona, Muscatine, Page, Polk, Pottawattamie, Scott, Story, Tama, Union, Van Buren, Wapello, Warren, Washington, Webster, Winneshiek and Wright - are eligible for specified tax relief. 

Note:  Taxpayers considered to be “affected taxpayers” eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. §301.7508A-1(d)(1), and include individuals who live, and businesses whose principal place of business is located, in the covered disaster area.  Taxpayers not in the covered disaster area, but whose books, records, or tax professionals’ offices are in the covered disaster area, are also entitled to relief.  In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area are eligible for relief.

Here’s a brief synopsis of the relief available:

• IRS originally accounced a postponement until July 28 for return filing, tax payment and certain other time-sensitive acts otherwise due between May 25 and July 28.  But, the postponement of time to pay does not generally apply to prior year tax liabilities.  Also, under the original IRS announcement, payments made in accordance with an installment agreement with IRS that are due on or after May 25, 2008, and before July 28, 2008, are postponed through July 28, 2008. However, on July 14, IRS announced an additional extension through August 29, 2008. (I.R. 2008-89) 

Note:   All IRS enforcement activities are suspended through August 29, 2008.  After that date, IRS field enforcement activities are to begin with an assessment of the impact of the storm on the taxpayer and provide an opportunity to defer actions for a reasonable period of time

• A waiver of the failure to deposit penalties for employment and excise deposits due on or after May 25 and on or before June 9, as long as the deposits were made by June 9.

• Taxpayers have until August 29, 2008 to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns), or to make tax payments, including estimated tax payments, that have either an original or extended due date falling on or after May 25, 2008, and on or before August 29, 2008.

• Taxpayers have until August 29, 2008, to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2007-56, 2007-34 I.R.B. 388 (August 20, 2007), that are due to be performed on or after May 25, 2008, and on or before August 29, 2008. This relief also includes the filing of Form 5500 series returns, in the manner described in section 8 of Rev. Proc. 2007-56. The relief described in section 17 of Rev. Proc. 2007-56, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.
  
  
  • The postponement of time to file and pay does not apply to information returns in the W-2, 1098, 1099 or 5498 series, or to Forms 1042-S or 8027. Penalties for failure to timely file information returns can be waived under existing procedures for reasonable cause. Likewise, the postponement does not apply to employment and excise tax deposits. The IRS, however, will abate penalties for failure to make timely employment and excise deposits, due on or after May 25, 2008, and on or before August 29, 2008, provided the taxpayer made these deposits by June 9, 2008.
• Affected taxpayers have the option of claiming disaster-related casualty losses on their federal income tax return for either 2008 or 2007. 

Note:  Claiming the loss on an original or amended return for last year will get the taxpayer an earlier refund, but waiting to claim the loss on this year’s  return could result in a greater tax saving, depending on other income factors.  Taxpayers claiming the disaster loss on last year’s return should put “Disaster Designation “Iowa/Severe Storms, Tornadoes and Flooding” at the top of the form so that the IRS can expedite the processing of the refund.

• Individuals may deduct personal property losses that are not covered by insurance or other reimbursements, but they must first subtract $100 for each casualty event and then subtract ten percent of their adjusted gross income from their total casualty losses for the year.

• The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers who need them to apply for benefits or to file amended returns claiming casualty losses. Such taxpayers should put the assigned Disaster Designation in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, from May 25 to August 29.

Note:  IRS computer systems automatically identify taxpayers located in the covered disaster area and apply automatic filing and payment relief.  Affected  taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 1-866-562-5227 to request tax relief.

Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.

Note:  Taxpayers may download forms and publications from the official IRS  Web site, irs.gov, or order them by calling 1-800-TAX-FORM (1-800-829-3676). The IRS toll-free number for general tax questions is 1-800-829-1040.