One of the most devastating major winter storms in the history of the State of Texas has finally passed. Recognizing the significant emotional and financial toll the storm has taken on Texans, the IRS recently released an announcement indicating that residents and businesses in all 254 Texas counties may qualify for tax relief. See TX-2021-02 (Feb. 22, 2021). This Insight summarizes some of the more noteworthy relief provisions.
Postponement of Certain Tax Deadlines.
Both the Internal Revenue Code and the governing regulations provide authority for the IRS to provide relief to those affected by a federally declared disaster. Exercising this authority, the IRS has declared that certain taxpayers “that reside or have a business in all 254 Texas counties qualify for tax relief.” These taxpayers include:
- Any individual whose principal residence is located in any of the 254 counties;
- Any business entity or sole proprietor whose principal place of business is located in any of the 254 counties;
- Any individual who is a relief worker affiliated with a recognized government or philanthropic organization and who is assisting in any of the 254 counties;
- Any individual whose principal residence, or any business entity or sole proprietor whose principal place of business is not located in any of the 254 counties, but whose records necessary to meet a deadline for certain tax-related acts are maintained in those counties;
- Any estate or trust that has tax records necessary to meet a deadline for certain tax-related acts and that are maintained in any of the 254 counties;
- Any spouse of an affected individual above, if the spouse files a joint return with such affected individual;
- Any individual, business entity, or sole proprietorship not located in any of the 254 counties, but whose records that are necessary for certain tax-related deadlines and that are located in one of the 254 counties; and
- Any individual visiting any of the 254 counties who was killed or injured as a result of the winter storm.
If the taxpayer fits within one of the specific categories above, the taxpayer has until June 15, 2021, 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 GST tax returns; annual information returns of tax-exempt organizations; and employment and certain excise tax returns), that have either an original or extended due date occurring on or after February 11, 2021 and before June 15, 2021.
In addition, these affected taxpayers are given an extension of time to make estimated income tax payments originally due on or after February 11, 2021, and before June 15, 2021—these payments are now due through June 15, 2021. Significantly, the IRS will not impose penalties for failure-to-pay estimated tax payments during this time, provided the payments are made on or before June 15, 2021.
Other Time-Sensitive Taxpayer Actions Extended.
The announcement also indicates that the IRS will give affected taxpayers until June 15, 2021, to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) that are due to be performed on or after February 11, 2021 and before June 15, 2021. These are similarly extended until June 15, 2021, and include:
- Filing a petition with the United States Tax Court;
- Filing a claim for credit or refund of any tax;
- Bringing suit upon a claim for credit or refund of tax; and
- Making contributions to certain retirement plans (including rollovers).
Qualifying taxpayers above also have the option to claim disaster-related casualty losses on their federal income tax returns for either the year in which the event occurred, or the prior year (i.e. to accelerate the losses). For those taxpayers claiming a disaster loss on a 2020 return, they should put the Disaster Designation, “Texas—Severe Winter Storms,” in bold letters at the top of the form. In addition, the disaster declaration number, FEMA 4586, should be included on the return.
IRS Collection or Examination Matters.
The IRS advises affected taxpayers who are contacted by the IRS in a collection or examination matter to explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.