The IRS has granted victims of the recent Colorado wildfires more time to file various individual and business tax returns and make tax payments. Specifically, victims of the fires that began on December 30, 2021, have until May 16, 2022, to file and pay tax returns and payments due between December 30 and May 15.
The tax relief is available to anyone in any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual assistance. At this point, only affected taxpayers who live or have a business in Boulder County qualify for the extensions, but the IRS will offer the same relief to any taxpayers in other Colorado localities designated by FEMA later.
The IRS will also work with other people who live 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.
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Deadlines Extended
The deadlines that are pushed back include the April 18, 2022, 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. Wildfire victims in the designated area will also have until May 16 to make 2021 IRA contributions.
Colorado wildfire victims will also get more time to make the quarterly estimated tax payments that are due on January 18 and April 18, 2022. This also means that 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. In addition, 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 extended to May 16 for Colorado wildfire victims, too. Penalties on payroll and excise tax deposits due from December 30 to January 13 will also be waived as long as the deposits were made by January 14, 2022.
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 Colorado 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 (opens in new tab) 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 (opens in new tab).
The deduction can be claimed on the tax return for the year the damage or loss of property occurred or for the previous year. So, for any wildfire destruction in 2021, the deduction can be claimed on either a 2020 tax year return or a 2021 return. In either case, you must write the FEMA declaration number on the return claiming the deduction. For the recent Colorado wildfires, the number is 4634DR.
If you decide to claim a deduction for 2020, you can amend your 2020 return by filing Form 1040X (opens in new tab). For this purpose, you must file the amended return no later than six months after the due date for filing your return (without extensions) for the year in which the loss took place. So, for Colorado wildfire losses in 2021, you would need to file an amended 2020 return by October 17, 2022. Affected taxpayers claiming the disaster loss on a 2020 return should also put the Disaster Designation ("Colorado Wildfires") in bold letters at the top of the form. See IRS Publication 547 (opens in new tab) for details.
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