At the height of wildfire season, the biggest fire to hit Orange County in more than a decade destroyed 25 structures and damaged 48. The Canyon 2 fire, which got its name because just last month another fire had burned to the east, caused evacuations of several elementary schools and closed eastbound 91. By the end of the week, it has almost been fully contained.
This week, the IRS announced tax relief for wildfire victims in northern California. The tax filing deadline for individuals and businesses will be moved to January 31, 2018. While counties listed were Butte, Lake, Mendocino, Napa, Nevada, Sonoma and Yuba, firefighters and relief workers called in from other parts in the state were also eligible.
What relief is available?
For businesses, the October 31 due date for quarterly payroll and excise tax returns along with estimated income tax payments has been extended out to January 31, 2018. Individual taxpayers who received an extension to file until October 16, 2017 will also now have until January 31, 2018. But tax payments that were due in April unfortunately do not qualify for the relief.
Reconstructing lost records
This is a good opportunity to discuss reconstructing tax-related records after a natural disaster. Individual taxpayers can request previous year tax transcripts in a number of ways.
Businesses can begin the process of piecing back together lost information with copies of bank statements and past tax transcripts. Expenses scanned and stored on a hard drive destroyed in a fire can be more difficult to replace.
You may be able to claim a casualty loss deduction when a sudden, unexpected or unusual event - a wildfire - damages or destroys your property. You generally claim the deduction in the year that it occurs. Those affected by a federally-declared disaster can claim the loss on their return from the preceding year by amending their return with Form 1040X.
There are generally two ways to calculate a loss:
- Decrease in the fair market value, the difference in value of a property prior to the wildfire and afterwards as determined by an appraiser
- The adjusted basis of the property - for example, what was paid plus increase value from a remodel
You may deduct the smaller of these two amounts after accounting for insurance or any other payments you have received.