Tax Relief Available for Kentucky Storm and Flood Victims

The IRS has granted victims of the recent severe storms, flooding, landslides, and mudslides in Kentucky more time to file various individual and business tax returns and make tax payments. Specifically, victims of the storms and flooding that began on July 26, 2022, have until November 15, 2022, to file and pay tax returns and payments due between July 26 and November 14.

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 Breathitt, Clay, Floyd, Johnson, Knott, Leslie, Letcher, Magoffin, Martin, Owsley, Perry, Pike, and Wolfe Counties qualify for the extensions, but the IRS will offer the same relief to any taxpayers in other areas designated by FEMA later.

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

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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 relief workers affiliated with a recognized government or philanthropic organization, and anyone visiting the area who was killed or injured as a result of the disaster.

Deadlines Extended

The deadlines that are pushed back for Kentucky storm and flooding victims include 2021 personal income tax returns that were supposed to be due on October 17, 2022. However, payments for 2021 income taxes that were due on April 18, 2022, are not extended.

Businesses with an original or extended income tax due dates within the affected time period also have more time to file and pay taxes. This includes partnerships and S corporations with 2021 tax year extensions expiring on September 15, and corporations with an extension expiring on October 17.

Quarterly estimated tax payments that are due September 15, 2022, are also extended until November 15. The due date for quarterly payroll and excise tax returns normally due on August 1, 2022, are extended to November 15, too. Penalties on payroll and excise tax deposits due from July 26 to August 9 are also waived as long as the deposits are made by August 10, 2022.

Taxpayers don't need to contact the IRS to get this relief. However, if an affected person receives a late filing or 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 Kentucky severe storms, flooding, landslides, and mudslides 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 the tax return for the year the damage or loss of property occurred or for the previous year. So, for any destruction in 2022, the deduction can be claimed on either a 2021 tax year return or a 2022 return. In either case, you must write the FEMA declaration number on the return claiming the deduction. For the recent Kentucky storms and flooding, the number is DR-4663-KY.

If you decide to claim a deduction for 2021, you can amend your 2021 return by filing Form 1040-X. 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 Kentucky storm or flooding losses in 2022, you would need to file an amended 2021 return by October 16, 2023. Affected taxpayers claiming the disaster loss on a 2021 return should also put the Disaster Designation ("Kentucky Severe Storms, Flooding, Landslides and Mudslides") in bold letters at the top of the form. See IRS Publication 547 for details.