The financial impact of Hurricane Katrina will not be known for many days, even weeks. But that is not stopping the Internal Revenue Service or the American Institute of Certified Public Accountants (AICPA) from doing what they can as fast as they can.
The IRS is offering taxpayers immediate relief in those counties and parishes that have been declared disaster areas by President Bush. The deadlines for making employment and excise tax deposits has been extended to September 23 while those for tax returns and other tax payments have been extended until October 31. In order to qualify for the extension, taxpayers should write “Hurricane Katrina” in red at the top of their tax forms when submitting them. Details and updated information is available on the IRS web site.
“Taxpayer who live in areas most often affected by adverse weather – tornadoes, earthquakes, hurricanes – should be aware that they have a number of important options under the tax law should disaster strike,” said Mark Luscombe, CPA, attorney and principal federal tax analyst for CCH.
In addition to extensions on tax filing and payment deadlines, small business owners can take advantage of “involuntary conversion rules for disaster damage” providing further assistance to those whose property is damaged or involuntarily converted in [residentially declared disasters. Business property damaged by a natural disaster is eligible for “non-recognition of gain” meaning that qualified replacement property can be purchased and the gain can be deferred.
“This provides relief for businesses that are forced to suspend operations for a substantial time due to the property damage,” Luscombe states. “In other words, if a business loses valuable customers during the suspension and the business fails, the owners may want to consider reinvesting their capital in a new business venture.”
The AICPA is also working to assist those affected by Hurricane Katrina. Disaster Recovery: A Guide to Financial Issues was developed by the AICPA PFP Team to help individuals and families at a time when they are most vulnerable to financial challenges. The Disaster Recovery CPA Mobilization Kit is also available to help state societies and CPAs in reaching out to those affected by the disaster. The AICPA and IRS have also joined forces to provide pro-bono tax assistance is also available to those coming to Department of Homeland Security/FEMA Shelters
The AICPA is mobilizing members through PCPS to identify and implement ways members from across the nation can assist individual CPAs and firms within the disaster area with practice continuation. PCPS plans to establish a “firm volunteer center” to identify firms wishing to volunteer resources, including office space, technology resources and even temporary employment, to affected CPA firms. A volunteer hotline will also be established to respond to firm continuity and disaster-related practice management issues. Details and updated information is available on the AICPA web site.