States Outside of Disaster Areas Offer Tax Filing Relief to Hurricane Victims by Michael Hirsch, JD, LLM
Posted on September 17, 2017
Several U.S. states are following the federal government’s lead and postponing certain tax-related deadlines and/or waiving penalties and interest for taxpayers who cannot file or pay their state-level taxes on time due to the devastation caused by Hurricanes Harvey and Irma.
Internal Revenue Code Section 7508A provides the federal government with the ability to extend the deadline of time-sensitive acts, such as filing federal tax returns, to individuals whose primary residences or places of business are located in a federal disaster area designated by the President.
For victims of Hurricane Harvey and Hurricane Irma, the IRS has extended until January 31, 2018, the deadline for payments of quarterly estimated taxes as well as the filing of quarterly payroll and excise tax returns and individual and business tax returns that were covered under an existing filing extension. Similarly, if you live in one of the affected counties in Texas or Florida, you may also qualify for sales tax exemptions on certain services and items that would otherwise be considered taxable. This exemption may apply to labor for the repair, restoration or remodeling of storm-damaged property.
These extensions may also be applied, at the discretion of the IRS, to taxpayers who are located outside the disaster area but who are in some way affected by the storms. This may include a taxpayer who must report his or her share of income from a trust, estate, partnership, or LLC that is located in an affected disaster area.
Additionally, the Department of Revenue in each of the 50 U.S. states and the District of Columbia will often make their own decisions regarding how they will treat taxpayers who live in covered disaster areas but have an obligation to file returns or pay taxes within their states. Following is an initial list of the states that have issued formal procedural rules. More are expected to do so in the future.
It is advisable that affected taxpayers consult with professional accountants and advisors to meet the specific filing requirements that vary from one state to the next.
Alabama follows federal filing extension deadlines and penalty relief granted to taxpayers who reside in disaster areas designated as such by the U.S. president. Alabama will also consider waiving late filing and late payment penalties to taxpayers who live outside the federally declared disaster areas but are unable to file on time due to documented damages or other weather-related circumstances associated with the storms.
California follows federal postponement periods of tax-related deadlines announced by the IRS and applies such relief to taxpayers determined by the California Franchise Tax Board to be affected by a state of emergency declared by the Governor. In addition, California will consider requests for penalty and interest abatement it receives from affected taxpayers who live outside federal disaster areas.
Colorado will follow the IRS’s extension period only when taxpayers directly affected by Hurricane Irma in Florida, Puerto Rico and the U.S. Virgin Islands make a formal request to the state’s Department of Revenue to postpone the due dates for filing their state tax returns, estimated payments and sales tax reports.
Connecticut will consider requests for extensions of time to file returns and pay state-level taxes on a case-by-case basis. In addition, the state’s Department of Revenue will also consider waiving penalties and interest based upon the individual taxpayer’s unique circumstances.
Delaware will follow the rules outlined by the IRS to provide a filing extension to taxpayers located in the impacted disaster areas. To avoid a penalty assessment for late filing, taxpayers whose records are located in the disaster area should submit to the Department of Revenue a written request seeking an additional extension.
District of Columbia will follow the federal filing extension for taxpayers who reside or own businesses in the affected disaster areas and who have an obligation to file returns or pay taxes that are due between Aug. 23, 2017, and Jan. 31, 2018, for victims of Hurricane Harvey, or between Sept. 4, 2017, and Jan., 31, 2018, for taxpayers affected by Hurricane Irma. The relief will also extend to taxpayers whose tax preparers or financial records are located in the disaster area. Excluded from disaster relief are sales and use tax returns and withholding.
Florida, which is in a covered disaster area, will extend until February 15, 2018, the deadlines for Florida corporate income tax returns, as well as Florida corporate income tax installment payments with original or extended due dates between September 4, 2017, and January 31, 2018. In addition, the Department of Revenue postponed the due date for sales and use tax, and fuel tax returns and payments to September 29, 2017.
Georgia will abide by the IRS’s extended filing deadline for all individual and business taxpayers located in the disaster area as well as relief workers from the state who are assisting in relief activities organized by a recognized government or philanthropic organization. In addition, the state will apply the federal filing extension to individual taxpayers who were injured or killed while visiting the covered disaster areas.
Idaho will apply the extended deadline set by the IRS to state income tax, sales tax, fuels tax, income tax withholding, and other tax filing obligations of its residents affected by the storms.
Illinois, as a general rule, follows federal tax filing extensions granted to victims of natural disasters, such as hurricanes and tornadoes. The state’s Department of Revenue will grant waivers of penalties and interest to those taxpayers who request abatement and explain why they cannot file or pay their state tax liabilities on time as a result of Hurricane Harvey and/or Hurricane Irma.
Kansas will follow the federal tax filing extension.
Kentucky will apply the federal tax filing extension to income tax, corporate income tax, and income tax withholding responsibilities of its taxpayers who are located in federal disaster areas.
Maryland will handle requests for filing extensions and relief from late-filing penalties and interest on a case-by-case basis. Affected taxpayers include anyone who lives or has a business in the federally declared disaster areas but has a responsibility to file Maryland withholding, sales and use, individual non-resident, corporate, admission and amusement, and alcohol and tobacco taxes.
Massachusetts will comply with the federal guidelines and automatically provide affected taxpayers with an extension to meet their state-level personal income and corporate excise tax obligations.
New Jersey has extended to Jan. 31, 2018, the tax filing deadlines for businesses and individual taxpayers who live or own a businesses in the disaster area, whose records are stored in the disaster areas and who serve as relief workers.
New Mexico has extended until Jan. 31, 2018, the deadlines for state taxpayers who live or have businesses located in the covered disaster areas to file personal, corporate, CRS (gross receipts, compensating, withholding), oil and gas, and combined fuel taxes. This extension will not apply to any payment of state-level taxes that are due.
North Dakota will follow federal guidelines and provide affected taxpayers with an extension to file income tax, sales and use taxes, oil and gas taxes, alcohol taxes, fuel taxes, and alcohol and tobacco taxes penalty and interest-free by Jan. 31, 2018.
Pennsylvania will follow the orders of the IRS and grant certain filing extensions for corporate taxpayers located in states that were directly impacted by the severe storms and flooding from Hurricane Harvey and Hurricane Irma. To avoid a late file penalty assessment, taxpayers should email a request for abatement to the Department of Revenue.
Rhode Island will handle requests for filing extensions and relief from late-filing penalties and interest on a case-by-case basis.
South Carolina will provide temporary relief to taxpayers affected by Hurricane Irma and located in Beaufort, Berkeley, Charleston, Colleton, Dorchester and Jasper counties. Additional counties may be included in the future. The state has extended until October 13, 2017, the deadline to file returns and pay any taxes that were originally due during the period of September 11, 2017 through October 13, 2017.
Texas will provide limited temporary filing extensions to businesses located in federally designated disaster areas who request such relief. However, the Comptroller’s office will grant an automatic extension to Jan. 5, 2018, to businesses in disaster areas with a 2017 franchise tax reports with valid extensions through Nov. 15, 2017. Additionally, the state will accept requests for a 30-day extension of time for affected taxpayers who are required to electronically report sales and use tax as well as those taxpayers who are located in disaster areas outside of Texas.
Washington will work with businesses that request an extension to file or pay their taxes on time due to the impact of Hurricane Irma.
As more states respond to the devastation and recovery efforts of taxpayers located in the path of Hurricanes Harvey and Irma, individuals and business owners should seek the counsel of experienced state and local tax advisors to guide them through the technical requirements needed to qualify for state-level tax relief.
About the Author: Michael Hirsch, JD, LLM, is a senior manager of Tax Services with Berkowitz Pollack Brant, where he specializes in state, local, and corporate taxation for business clients. He can be reached at the CPA firm’s Fort Lauderdale, Fla., office at (954) 712-7000, or via email at email@example.com.