Natural Disasters and the Tax Law
some tax consequences of Hurricanes Katrina and Rita
Article summary. The recent devastation of parts of Louisiana, Mississippi, Alabama, and Texas by Hurricanes Katrina and Rita has raised a number of tax questions of direct relevance to church leaders. This article will review several of them.
On August 29, 2005, Hurricane Katrina slammed into the central gulf coast near New Orleans as a Category 4 storm. It caused damages of unprecedented magnitude in Louisiana, Mississippi, and Alabama, with much of the damage occurring in New Orleans as a result of flooding caused by a failure of the levee system caused by the storm surge. Over 90,000 square miles were declared disaster areas by the federal government. A few weeks later, Hurricane Rita made landfall between Sabine Pass, Texas and Johnson's Bayou, Louisiana as a Category 3 storm, causing significant damage.
There are a number of tax issues associated with any natural disaster. This article will address some of the more important ones.
(1) Tax deadlines
The IRS is giving "affected taxpayers" until Feb. 28, 2006 to file most tax returns (including individual income tax returns and employment tax returns), or to make tax payments, including estimated tax payments, that have either an original or extended due date falling on or after Sept. 23, 2005 and on or before Feb. 28, 2006. The IRS will abate interest and any late filing or late payment penalties that would apply during this period to returns or payments subject to these extensions. This relief includes the October 17 deadline for individuals who received a second extension for filing their individual income tax returns; the October 31 deadline for filing quarterly federal employment tax returns; and employment deposits due on or before February 28, 2006. In addition, any affected taxpayer who receives a penalty notice from the IRS should call the number on the notice to receive penalty abatement.