Tax Relief Available for Arkansas, Illinois, Kentucky and Tennessee Tornado Victims

Victims of the recent tornadoes in Arkansas, Illinois, Kentucky and Tennessee will get more time to file various individual and business tax returns and make federal tax payments, according to the IRS. Specifically, the tax relief is currently available to people affected by the storms, tornadoes and flooding that took place in those states starting on December 10 in the following counties:

• Arkansas – Craighead, Jackson, Mississippi, Poinsett and Woodruff Counties.
• Illinois – Bond, Cass, Coles, Effingham, Fayette, Jersey, Macoupin, Madison, Menard, Montgomery, Morgan, Moultrie, Pike and Shelby Counties.
• Kentucky – Barren, Breckinridge, Bullitt, Caldwell, Christian, Fulton, Graves, Grayson, Hart, Hickman, Hopkins, Logan, Lyon, Marion, Marshall, Meade, Muhlenberg, Ohio, Shelby, Spencer, Taylor, Todd and Warren Counties.
• Tennessee – Cheatham, Davidson, Decatur, Dickson, Dyer, Gibson, Henderson, Henry, Lake, Obion, Stewart, Sumner, Weakley and Wilson Counties.

Tax relief will also be extended to people in other locations that are later designated by the Federal Emergency Management Agency (FEMA) as a disaster area.

The IRS will also work with anyone who lives outside the affected areas, but whose tax records are in one of the tornado disaster areas. Call the IRS at 866-562-5227 if this applies to you. This includes workers assisting the disaster relief activities who are affiliated with a recognized government or philanthropic organization.

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Which Deadlines Are Extended?

Various tax filing and payment deadlines from December 10, 2021, to May 15, 2022, are extended until May 16, 2022, for the storm and tornado victims. This includes the April 18, 2021, due date for filing a 2021 personal income tax return and paying 2021 taxes, and various business returns normally due March 15 and April 18. Tornado victims in the designated areas will also have until May 16 to make 2021 IRA contributions.

The victims will also get more time to make the quarterly estimated tax payments that are due on January 18 and April 18, 2022. As a result, impacted taxpayers who pay estimated taxes don't have to submit the fourth quarter payment for 2021 that's normally due January 18 and, instead, can simply include it with the 2021 tax return they file by May 16. The extension also means that farmers who would normally skip estimated payments and file their returns by March 1, 2022, can now wait until May 16 to file their 2021 return and pay any tax due.

The due date for quarterly payroll and excise tax returns normally due on January 31 and May 2, 2022, are pushed back to May 16 for the tornado victims, too. Penalties on payroll and excise tax deposits due from December 10 to December 26 will also be waived as long as the deposits are made by December 27, 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

Arkansas, Illinois, Kentucky and Tennessee storm and tornado victims 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. Those numbers are:

• Arkansas – DR-4633-AR;
• Illinois – 3577EM;
• Kentucky – 4630DR; and
• Tennessee – DR-4637-TN (3576EM for victims in Decatur and Dyer Counties).

We also recommend writing "Arkansas Severe Storms and Tornadoes," "Illinois Tornado," "Kentucky Tornado" or "Tennessee Severe Storms, Straight-Line Winds and Tornadoes" in bold letters at the top of the form if you're claiming a disaster loss on your 2020 return. See IRS Publication 547 for details.

If you decide to claim a deduction for the 2020 tax year, 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 Arkansas, Illinois, Kentucky or Tennessee storm or tornado losses in 2021, you would need to file an amended 2020 return by October 17, 2022.