Wildfire tax relief

Tax Relief is Available for Taxpayers Affected by the Wildfires in California

California is facing wildfires among the deadliest and the most destructive in state history. The drought and the highs winds contributed to the spread of wildfires that caused several injuries and significant property damage. The Governor of California, Jerry Brown, declared a state of emergency on October 9, 2017 in nine counties: Butte, Lake, Mendocino, Napa, Nevada, Orange, Solano, Sonoma, and Yuba.

In an act of solidarity, tax relief measures have been undertaken by the Internal Revenue Service (IRS), the Franchise Tax Board (FTB), and the Employment Development Department (EDD) of California.

Federal Tax Relief

At the federal level, the IRS automatically provides filing and penalty relief to any taxpayer who lives or has a business located in the covered disaster area. Therefore, there is no need to contact the IRS to get this relief unless the tax relief was mistakenly not applied to a taxpayer who was entitled to it. Taxpayers who are not in the covered disaster area but whose records are in the covered disaster area need to contact the IRS at 1-866-562-5227 to get the relief. The Service gives affected taxpayers until January 31, 2018 to file most tax returns (e.g., individual, corporate, partnership returns, etc.) that have either an original or extended due date occurring on or after October 8, 2017, and before January 31, 2018. Also, affected taxpayers that have an estimated income tax payment originally due on or after October 8, 2017, and before January 31, 2018, will not be subject to penalties for failure to pay estimated tax installments as long as such payments are paid on or before January 31, 2018.

State Tax Relief

At the state level, the FTB announced special tax relief for California taxpayers impacted by the wildfires. Affected taxpayers are granted an extension to file their 2016 California tax returns (for both personal income taxes and corporate taxes) and can make payments until January 31, 2018.

Affected taxpayers may also claim a deduction for a disaster loss by either claiming the loss when they file their 2017 tax return next spring or, in the alternative, by claiming the loss by filing either an amended or original 2016 tax return. The advantage of claiming the disaster loss in the prior tax year is that the FTB can more quickly issue a refund. Taxpayers should write the name of the disaster in red ink at the top of the tax return to alert the FTB to expedite the refund or follow the software instructions to enter disaster information if they are e-filling.

Finally, the EDD has declared that employers have a 60-day extension to file state payroll reports and deposit state payroll taxes without penalty or interest. However, the extension is not automatic and the EDD must receive written requests for extension within 60 days from the original date of the return or payment.

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