Ah, that time of year already. . the mailbox is full of 1099’s and everyone is procrastinating tax preparation! It’s depressing under normal circumstances, but for those affected by the fire, it is probably beyond daunting. We have come across a few little tidbits of tax relief for disaster victims that you should be aware of. As always, we HIGHLY recommend you discuss these things with your CPA or tax preparer, but here are some items you may find useful. . .
According to the IRS, some victims of the California Wildfires may qualify for some tax relief. Most notably, according to their website the filing deadline has been extended from April 15th to April 30th. The deadline for estimated quarterly payment is also extended to April 30th for those affected. There are other deadline extensions and penalties available for certain payroll and other taxes, be sure to check the website. Generally the CA Franchise Tax Board will align with the IRS extensions, but you can check their website here.
Many victims of the fire had losses above and beyond what was covered by insurance. Those losses may be able to be deduced as a Casualty Loss. For details, see Form 4684, Casualties and Thefts and its Instructions.
If you lost copies of your tax returns in the fire, the IRS will waive the fees associated with providing you copies of previously filed returns. You need to submit a request on Form 4506 and write “California Wildfires” in Red on the top of the form. California will also waive fees to provide copies of previously filed tax returns - Form FTB 3516, Request for Copy of Tax Return be sure to print the name of the disaster in red ink (for example, Camp Fire) at the top of the request.
Unfortunately, we have numerous investors who have lost their properties in the Camp Fire. While we have been focused on finding people homes these last couple of months, the questions are beginning to role in from some of those investors. In answer to the most pressing, common questions - Insurance proceeds do NOT need to be deposited with an intermediary; you do not need to do a 1031 Exchange. When you have lost your property to a casualty such as a fire, or any other "involuntary conversion" you will likely participate in a 1033 Exchange. Generally you will have up to 2 years to identify replacement property. Here is a link to a quick simple read on the differences between 1031 and 1033 exchanges if you'd like to learn more: https://firstexchange.com/deferring-gain-condemned-property-1033-exchanges
As always, if you’d like to discuss investment in real estate or you have any questions at all, please don’t hesitate to reach out!