Tax Breaks

Tax Relief Available for California Wildfire Victims

Following FEMA's recent disaster declaration, residents and businesses impacted by the California wildfires get more time to file and pay taxes.

The IRS has granted victims of the California wildfires more time to file various individual and business tax returns and make tax payments. Specifically, victims of the fires that began on July 14, 2021, have until January 3, 2022, to file and pay tax returns and payments due between July 14 and January 2.

The tax relief is available to anyone in any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual assistance. This includes people affected by the wildfires that reside or have a business in Lassen, Nevada, Placer, Plumas, Tehama and Trinity Counties.

The IRS will also work with any taxpayer who lives outside the disaster area but whose tax records are in the disaster area. Call the IRS at 866-562-5227 if you face this situation. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.

The IRS will also waive fees for obtaining copies of previously filed tax returns for taxpayers affected by the wildfires. When requesting copies of a tax return or a tax return transcript, write "California Wildfires" in bold letters at the top of Form 4506 (copy of return) or Form 4506-T (transcript) and send it to the IRS.

Deadlines Extended

The deadlines that are pushed back include the October 15, 2021, due date for filing a 2020 income tax return that was extended (the original due date was May 17, 2021). California wildfire victims will also get more time to make the quarterly estimated tax payments that are due on September 15, 2021.

The due date for quarterly payroll and excise tax returns normally due on August 2 and November 1, 2021, are extended for wildfire victims, too. Penalties on payroll and excise tax deposits due from July 14 to July 28 will also be waived as long as the deposits were made by July 29, 2021.

Taxpayers don't need to contact the IRS to get this relief. However, if an affected person receives a late filing or late payment penalty notice from the IRS, he or she should call the number on the notice to have the penalty abated.

Deduction for Damaged or Lost Property

Victims of the California wildfires may be able to claim a tax deduction for unreimbursed damaged or lost property. To do so, they typically must itemize and file Schedule A with their tax return. However, victims who claim the standard deduction may still be able to deduct their losses if they can claim them as business losses on Schedule C.

The deduction can be claimed on either a 2020 tax year return or a 2021 return (which is due next year). In either case, you must write the FEMA declaration number on the return claiming the deduction. For the recent California wildfires, the number is FEMA 4610-DR. Affected taxpayers claiming the disaster loss on a 2020 return should also put the Disaster Designation ("California Wildfires") in bold letters at the top of the form. See IRS Publication 547 for details.

If you decide to claim a deduction for 2020 and you have already filed your 2020 return, you can amend your 2020 return by filing Form 1040X. For this purpose, you must file your amended prior-year return no later than six months after the due date for filing your current-year return (without extensions) for the year in which the loss took place. So, for California wildfire losses in 2021, you would need to file an amended 2020 return by October 17, 2022.

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