How Can Disaster Affect Someone's Tax Filing?

How can disaster affect someone's tax filing? When you're in the aftermath of a disaster, the last thing that may be on your mind is filing your taxes. However, when tax season rolls around, there are some things you should be aware of when filing your returns.

There is often no way to prepare for disasters that can occur, or the stress and heart ache in dealing with life's difficult circumstances after a tragedy. In recent years there has been much devastation due to natural events such as hurricanes, floods and fires. When you're in the aftermath of a disaster, the last thing that may be on your mind is filing your taxes. However, when tax season rolls around, there are some things you should be aware of when filing your returns.


There are many tax reliefs accompanied by an event when it is declared by the President to be a 'disaster area.' One form of tax relief is that the IRS postpones dates for filing and making certain tax payments. Another is in that, in many cases, grants received from the state or charitable organizations in the form of assistance are not taxable. In addition, you can often claim your losses. "There's casualty losses, which is part of your Schedule A," notes Brian K. Gilroy, Attorney and CPA . He refers to the tax code, in which the IRS describes a 'casualty' as, "the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual." In IRS Publication 547, Casualties, Disasters and Thefts, it defines these events as sudden, unexpected, unanticipated, unintended, and unusual. Events that may qualify are: car accidents, earthquakes, fires, floods, hurricanes, mine cave-ins, shipwrecks, sonic booms, storms, thefts, tornados, vandalism, volcanic eruption, and other accidents. Damage that occurs because of something that broke in normal way, because of your pet, because or arson or some negligence (such as a car accident when driving recklessly) on your part are not considered to be casualty and you cannot claim them.




Form 1040 Schedule A is for itemized deductions. If most of your records were lost, you may need to reconstruct them for tax purposes in order to prove your losses. Depending on how much loss you've suffered, this could be the beginning of a hunt for you. The IRS recommends you begin by seeking out such things as property tax statements and appraisals, copies of insurance policies, copies of statements of contractors who may have done work on your home, Kelly Blue Book values for your vehicles, old catalogs showing the value of things such as your furniture and personal effects... anything that can help you estimate the value of what you've lost. Once you've gathered these things together you can begin to figure out the values of what you lost, so that you can see what might be deductible. Mr. Gilroy reminds, "The Schedule A only applies if your itemized deductions are going to be greater than your standard deduction, and there are very specific rules for deductibility of casualty and theft losses. So, in all cases, I recommend you see a tax advisor."

Even if you are just assisting in relief efforts after a disaster, you may be entitled to claim some deductions. "In looking at the tax code this year [2006], you see [Hurricane] Katrina all over it..." says Mr. Gilroy. " Whenever something like that happens, the Federal Government quickly makes arrangements for helping those in disaster areas, but it normally has to be a federally declared disaster area... For Instance, with the Katrina disaster there are numerous tax breaks for charitable purposes for donating to any Katrina efforts. " Things such as goods you donate and expenses you may have incurred while providing assistance in a disaster area may be tax deductible, so be sure to keep receipts and discuss deductions with a tax professional when the time to file comes.

© High Speed Ventures 2011