AICPA Proposes Quick Disaster Relief for Taxpayers
by Terri Eyden on
By Ken Berry, Correspondent
The federal tax law provides relief to victims of natural disasters, like Superstorm Sandy along the East Coast and recent wildfires and flooding in the West, but taxpayers generally have to wait until the government works its way through a lengthy process for each specific event. Now the American Institute of CPAs (AICPA) has proposed a faster solution: Permanent disaster relief that will be triggered automatically.
In a letter addressed to members of the Senate Committee on Finance and the House Committee on Ways and Means, the AICPA formally outlined its position by proposing ten permanent disaster relief provisions. The letter was sent to both houses of Congress, the Treasury Department, and the IRS.
"The AICPA, like you and many others in our country, is all too familiar with the devastating consequences of disasters, such as hurricanes Sandy and Isaac and, more recently, the severe storms, fires, floods, landslides, and mudslides in Colorado," stated the letter. "Therefore, we are sensitive of the need to include permanent tax provisions in the Internal Revenue Code that will quickly aid affected taxpayers who are recovering from the impacts of future natural disasters."
The ten changes proposed by the AICPA are as follows:
1. Waive the tax law limits of 10 percent of adjusted gross income (AGI) and the $100-per-casualty floor.
2. Allow a five-year carryback period for net operating losses attributable to a disaster.
3. Increase the Section 179 limit in either the year of the disaster event or the following year by the lesser of a specified amount ($100,000) or the cost of "qualified property."
4. Allow a five-year replacement period (increased from two) for property damaged or destroyed by a disaster event.
5. Impose no tax on victims of a disaster event who withdraw up to a specified amount ($100,000) from a qualified plan or IRA and repay that amount within five years.
6. Allow a partial or full exemption to individuals who provide at least sixty days of temporary rent-free housing to a person dislocated by a disaster event.
7. Allow victims of a disaster event to exclude from taxable income "cancellation of debt" (COD) income for non-business debts if the cancellation occurs within one year of the beginning date of the disaster event.
8. Allow a tax credit of 40 percent of qualified wages of up to $6,000 in qualified wages per employee for specified disaster-damaged businesses.
9. Allow affected taxpayers in the disaster area to use either their current year or previous year's income amounts for purposes of calculating the Earned Income Tax Credit, the Child Tax Credit, and the Health Care Premium Credit.
10. Eliminate the medical deduction floor percentage (generally 10 percent of AGI or 7.5 percent for taxpayers over sixty-five years of age) for an individual who incurs deductible medical expenses directly related to an injury caused by the disaster event.
"Presently, the federal government deals with each of these occurrences as an individual event, and relief offered through the tax system varies, for the most part, with each event," the letter continued. "This process results in taxpayers receiving different treatment for similar losses and not knowing what tax treatment they will receive until Congress enacts some form of relief, which frequently occurs long after the disaster. The AICPA proposes permanent disaster relief tax provisions that would take effect immediately when a triggering event occurs."
AICPA officials believe that implementation of permanent disaster relief provisions will provide taxpayers with certainty, fairness, and the ability to promptly receive the relief they need after a natural disaster, while significantly reducing the administrative burdens on the IRS to react to unexpected disasters.
- AICPA Asks Congress to Amend Hurricane Sandy Tax Relief Act
- IRS Opens Window Longer for Sandy Victims
You may like these other stories...
For bitcoin users, the taxman cometh. And you best know how to calculate taxes owed on what the IRS calls convertible virtual currency.In March 2014, the IRS issued Notice 2014-21, which declares virtual currency will be...
Majority of House of Representatives urges leadership to preserve cash method of accounting for tax purposesA bipartisan majority of the House of Representatives – 233 members – has signed a letter urging House...
More than 1 million tax payments have been processed so far in 2014 through IRS Direct Pay, a free web-based payment system that debuted earlier this year, the tax agency announced on Wednesday.Available through the Pay Your...
Upcoming CPE Webinars
In this course, Amber Setter will shine the light on different types of leadership behavior- an integral part of everyone's career.
In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards. A dashboard condenses large amounts of data into a compact space, yet enables the end user to easily drill down into details when warranted.
This webcast will include discussions of important issues in SSARS No. 19 and the current status of proposed changes by the Accounting and Review Services Committee in these statements.
Amber Setter will show the value of leadership assessments as tools for individual and organizational leadership development initiatives.