Hurricane Harvey – Robert T. Stevenson, P.C., CPA

Hurricane Harvey Casualty Loss and NOLs

17 Mar 201817 Mar 2018Leave a comment

As Tax Day draws nearer, I continue to hear questions from taxpayers whose homes were affected by Hurricane Harvey. Today, I explore one instance in which a casualty loss from Harvey may be treated as an NOL, or net operating loss, and used to recover prior tax payments.

Can Your Casualty Loss from Hurricane Harvey Create an NOL for Carryback?

Yes. There may be an opportunity for an additional refund.

Individuals can claim an NOL for casualty losses that exceed the amount that can be utilized in the year the loss was sustained and reported. For those who suffered severe damage, the casualty loss may exceed their income and, therefore, they would not be able to fully utilize their casualty loss deduction for the year in which the loss occurred. The IRS allows such individuals to treat the loss as an NOL and carry it back to prior years. If income was insufficient in the prior years, a carryforward is available.

If done within one year of the NOL year, then you would use Form 1045; this will allow the taxpayer to receive a prompt refund. If the claim is filed more than one year after the close of the NOL year, then it must be filed on Form 1040X within the relevant statute of limitations for the loss year. Your normal NOL gets a two year carryback, but a special rule for casualty losses extends the carryback period to three years.

Congress enacted a special five-year carryback for those who suffered a loss from Hurricane Katrina. However, a similar special five-year carryback was not enacted for those who suffered losses from Hurricane Sandy. Tax professionals will be keeping an eye out for any new legislation that might extend the carryback period for victims of Hurricanes Harvey and Irma. Hopefully very few taxpayers will need five years to absorb their loss.

That is all for today. I look forward to visiting with you next week. In the meantime, don’t hesitate to reach out with questions. Feel free to email robert@robertstevensoncpa.com or call my office at (713) 785-8939. I’m also available by text at (713) 906-8331.

Hurricane Harvey Casualty Loss and Form 4684

5 Feb 20181 Comment

As Tax Day draws nearer, I’ve had a number of questions about Hurricane Harvey and casualty loss. Today, I’ll walk you through what you need to file Form 4684 for casualty loss deductions with your 2017 tax return.

Form 4684, Casualties and Thefts was designed especially for storms like Hurricane Harvey. In 2017, you will be able to take an itemized deduction by completing the form and attaching it to your Form 1040. Also, it’s important to know that twenty counties along the Texas Gulf Coast, including Harris County, were Presidentially Declared Disaster Areas. Once the President declares an area a Presidentially Declared Disaster Area, then the IRS can administratively make temporary changes to the law, such as extending the due dates of returns and estimated tax payments, and they can lift the 10% of AGI threshold for casualty losses. And that is what they did. If your home was flooded and your personal possessions were lost in the flood, then you need to complete Form 4684.

Here is what you will need to complete the form:

The cost or basis of your home
Your insurance or other reimbursement (ie: FEMA)
Your fair market value before the storm
Your fair market value after the storm

This is the information you will need to complete your casualty loss deduction. If you struggle with any of these items, such as the FMV of your home after the storm, don’t hesitate to ask your realtor or real estate appraiser, or contact the Harris County Appraisal District. If you need any help with any of this, then please give me a call.

That is all today. I look forward to visiting with you next week. In the meantime, please let me know if you have any questions — you can call my office at (713) 785-8939 or leave a comment on this post to get in touch.

Is That Knock at the Door Someone From the IRS, or Someone Scary?

31 Oct 2017Leave a comment

Happy Halloween! Read on for an update on the federal aid package for hurricane and wildfire victims. Plus, I teach you how to distinguish an IRS employee form a common scammer—or a neighborhood trick-or-treater.

Disaster Aid Package is Signed by the President

In my October 17 post, I discussed the $36.5 billion aid package for hurricane and wildfire victims that had passed in the House. It finally passed in the Senate and President Trump signed the bill on October 26, 2017. I also mentioned that the financially troubled National Flood Insurance Program would be bailed out—it received approximately $17 billion. I have heard people complain that their loss far exceeded their insurance reimbursement and I have also heard the uninsured speak of how difficult it was to get paid for their loss from FEMA. We now understand that there wasn’t enough aid to go around. Due to this current infusion of aid for disaster relief in Texas, Florida, Puerto Rico, California, and the U.S. Virgin Islands, I would suggest you go online again.

It’s Halloween! Is That Knock at the Door Someone From the IRS, or Someone Scary?

Children knock on doors pretending to be spooks and movie characters. Scammers don’t limit their impersonations to just one day. People can avoid falling victim to scammers by knowing how and when the IRS does contact a taxpayer in person. These 8 tips can help you determine if an individual is truly an IRS employee.

1. The IRS initiates most contacts through regular mail delivered by the USPS.
2. There are special circumstances when the IRS will come to a home or business. These are:

When a taxpayer has an overdue bill.
When the IRS needs to secure a delinquent tax return or a delinquent payroll tax payment.
To tour a business as part of an audit.
As part of a criminal investigation.

3. Generally, home or business visits are unannounced and are made by IRS Revenue Officers.
4. IRS Revenue Officers carry two forms of identification. Both forms have serial numbers, and taxpayers can ask to see both IDs.
5. The IRS can assign certain cases to private debt collectors, but the IRS does this only after giving written notice to the taxpayer or their appointed representative. Private debt collection agencies will never visit a taxpayer at their home or business.
6. The IRS will not ask a taxpayer to make a payment to anyone other than the “United States Treasury.”
7. IRS employees conducting audits may call taxpayers to set up appointments, but only after notifying them by mail.
8. IRS criminal investigators may visit a taxpayer’s home or business unannounced while conducting an investigation. These are federal law enforcement agents and they will not demand any sort of payment. At this stage, you should have a tax attorney and privileged communication.

Taxpayers who believe they were visited by someone impersonating the IRS can visit IRS.gov for information on how to report it.

Three Easy Ways to Report Your Property Damage

3 Oct 20173 Oct 2017Leave a comment

Harris County homeowners who suffered damage from Hurricane Harvey can report their damage to the Harris County Appraisal District (HCAD) through the following ways:

The HCAD’s upgraded app, available for Apple and Android phones.
By phone at (713) 812-5805. You will need to provide your name, address, phone number, and account number, if you have it, along with the type of property damage and amount of water you received.
You can also email that information to help@hcad.org.

Reporting property damage now will help the appraisal district identify the most damaged neighborhoods and properties to help homeowners next year when property is reappraised.

Remember, your property tax liability is based on the appraised value as of January 1 of each year. Therefore, your tax bill for 2017 is based on your appraised value at January 01, 2017. And likewise, if your home has not been completely repaired as of January 1, 2018, then you should become eligible for a reduced value for 2018.

5 Tips for Tax-Smart Charitable Contributions

19 Sep 2017Leave a comment

The generosity of the American people is never more evident than during a disaster event. Houston has experienced widespread devastation as a result of Hurricane Harvey. In its aftermath, hundreds of relief funds are being set up and promoted to aid those impacted by the storm. You clearly want to help, so how do you ensure that your generous donation will not only benefit those in need but also be tax deductible?

Here are a few things to consider.

1. Verify Tax Exempt Status

Make sure your recipient organization has been granted 501(c)(3) tax exempt status by the Internal Revenue Service. These organizations have been established for charitable purposes and donations to them are tax deductible as allowed by law. They also are required to file annual tax returns reporting their charitable contribution income, their unrelated business taxable income, and their business expenses. These returns are available for public inspection, usually upon request. You can confirm an organization’s exempt status on the IRS website.

2. Get a Receipt

Organizations that are eligible to receive tax deductible donations are required to provide a receipt to donors for any gift of $250 or more. The receipt acknowledges the donation amount, the date of donation, the organization’s tax exempt status, and their tax ID number. You should obtain and keep the receipt as additional support for your tax deductible donation.

3. Be Wary of Crowdfunding

Crowdfunding sites such as GoFundMe or YouCaring are popular ways to raise money for various types of causes on social media. Since crowdfunding websites are open for use by anyone, many of the funding pages are not established by qualified charitable organizations. Before giving through such sites, do your homework to ensure that your support is going to a charitable organization with qualifying tax-exempt status.

4. Appreciated Securities

Consider donating appreciated stocks, bonds, or mutual funds to a charity or a donor advised fund. When you donate appreciated securities held longer than a year, you are able to deduct the fair market value of the security as a charitable contribution. This also avoids the capital gains tax because the security is being donated instead of being sold.

5. Autos and Boats Worth More Than $5,000

In most cases you will need a written appraisal, which will be attached to the return. You will also need a written acknowledgement from the donee organization which will include any proceeds from the disposition of the vehicle by the donee organization. This acknowledgement must also be attached to the return.

In addition, you will need a Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, from the donee organization. Most charities will use the Form 1098-C to fulfill the written acknowledgement requirement. And yes, you will attach the Form 1098-C to your tax return.

If you have additional tax questions, give me a call at (713) 785-8939. I’d love to hear from you.