April Walker: Today's podcast listen for the latest on disasters and tax relief.

Hello, everyone.

Welcome back to the AICPA Tax Section Odyssey podcast, where we offer thought leadership on all things tax facing the profession.

I'm April Walker, a Senior Manager from the Tax Section.

I'm here today with Gerard Schreiber, Master of Disaster, coming to us from New Orleans, Louisiana.

I'm also excited to have my colleague with me, Brandon Nishnick.

He's a manager here on the Tax Practice and Ethics team.

Welcome Gerry and Brandon.

Gerard Schreiber: Thank you, April.

Brandon Nishnick: Thank you, April.

April Walker: We had some legislation that passed the Federal Disaster Tax Relief Act of 2023.

It actually passed in late 2024.

Gerry, can you talk a little bit about what issues it did address in disaster tax relief and also cover what still needs to be improved?

Gerard Schreiber: April, what we have, we have an act called the Federal Disaster Tax Relief Act of 2023.

Now, there's something that is distinct about this that most listeners may not realize.

This is a non-code section public law.

Meaning, this is not part of the internal revenue code.

We're very familiar with internal revenue code sections, but this is not in any internal Revenue code sections.

Again, this is a non-code section public law, and it is law and it must be followed.

Now, this was meant to fill a gap that started in January of 2021, where the previous law and the special provisions concerning casualty losses expired from a previous law.

We had a gap from January of 2021 through December of 2024.

It stops I think, January 11th of 2025.

But there was a gap.

In 2021, there was some winter storms that affected Louisiana, Oklahoma, and Texas.

That's probably the disasters that it started with and it carried through other major disasters.

For instance, Hurricanes, Ida, Ian, Francine, Helene, Milton, the wildfires in Hawaii and in California, and also there's other disasters that are going to be less known than those but are going to be on the IRS website and on the FEMA website to explain in other states.

Anything with a major disaster declaration from the White House would be covered during that period of time.

There's two other things that are covered.

One is there's something concerning California wildfire payments and the East Palestine, Ohio, train disaster that those payments are listed also.

If you would have those two items, then what you do is you need to read the act and to see how it will affect your particular set of circumstances.

April Walker: Quite a while, a lot of confusion around certain disasters were they included, were they not.

We had some really good news with this act.

This act was retroactive, correct?

There may be a potential for being able to go back and amend tax returns if they were covering these act, is that right?

Gerard Schreiber: Yes, correct.

I'm hearing about a lot of amended returns, for instance, in Louisiana here being filed for Hurricane Ida because of the more generous treatment that taxpayers are in a better set of circumstances and are getting refunds.

I would imagine in Florida, well, [For] Ida, the problem is that the statute running this year, and then the statutes running next year on Ian and Francine.

I would think that in Florida, the subject of amended returns is coming up also or will come up.

April Walker: One question that we get quite a bit is around that terminology of qualified disaster, those certain disaster related personal casualty losses.

What does that actually mean that additional benefit that you were able to receive as a taxpayer if you're under one of those disasters?

Also, we talked a little bit about this, but how does it apply to our recent disasters, for example, the California wildfires?

Gerard Schreiber: Let's start with the Bible, so to speak, This is publication 547, the IRS publication.

It lists the three types of casualties that you can have.

The problem that we've had was after 2020 was with the terminology of something called a qualified disaster.

That a qualified disaster got better treatment than a non-qualified disaster.

Most people doing these returns and listening to this will be familiar with the subject of the 10% of adjusted gross income limitation.

A qualified disaster does away with the 10% of adjusted gross income limitation, and it gets added on to either the standard deduction or the taxpayer's itemized deduction.

It's a much more generous treatment for the taxpayer as far as their deduction goes.

That was a gap that we had since 2020 with all these disasters, was that it was a confining set of circumstances with the 10% of AGI limitation.

Now, the disasters that qualify in this time period, then that's a much more generous treatment.

April Walker: I know it's not clear exactly, but for those that have been a victim of the California wildfires, I know that there is a question around whether those are considered qualified disasters or not related to the dates.

You want to speak to that for a second.

Gerard Schreiber: The statute says for disasters where the incident date ends maybe something like January 11th of 2025.

I could be off a day or two there, but it has a sentence in there like that.

Now, let me go back one step and say again to everyone who's doing these returns that you should be familiar with the FEMA website.

There is a page that lists all the FEMA declarations, and it'll list whether they're a DR, a major disaster, an FM, which is a fire management disaster or EM, which is an emergency management declaration.

But so to get special treatment, you need a major disaster declaration, which is issued by the White House.

Now, getting back to Los Angeles.

Those words are in there in the statute, disasters with the incident date.

Let me say, the incident period that's a FEMA term.

That's why I say look at the FEMA website because it will say incident period beginning and incident period ending, or it says ongoing.The LA fires it says ongoing.

It does not meet the statutory language in the act of ending January the 11th, or whatever the date is 2025.

Now, that's where the problem comes in.

Now, people have talked to the congressional staff who drafted this and they said that's not supposed to be that way.

I've had conversations with the California CPA Society, the Committee on Taxation out there, COT is what they call it, and so they know what it is.

Right now, they're the biggest stakeholder and they have to work out something with the people in Washington on the interpretation or getting the statute changed.

But for right now, we don't know what it says.

The congressional staff says, no, it's not supposed to mean that, but I tend to think that IRS would take a strict interpretation of those words.

But again, nobody's had any conversations that I've heard of yet.

It's something that's a developing story, and we'll just have to see where it goes.

April Walker: Just to reiterate, I know we've talked about this on podcast before.

One of the AICPA's advocacy priorities is around not having to worry about these dates.

Gerard Schreiber: I think getting automatic relief.

Let me talk about Code Section 7508A, is going to be the mechanism that IRS uses for the filing delays.

One of the AICPA priorities for many years has been an automatic delay.

A few years ago, 7508A(d) It's an automatic 60-day delay where there's a major disaster declaration, and they talk about the incident date.

Starting with the incident date, which the starting incident date you're going to get from the FEMA website that I talked about before, and it's going to be 60 days from that.

There's going to be an automatic filing delay pending a declaration or anything from IRS.

Now, the reason why that was put in is for many years, we had a problem with these hurricanes always occurring very close to the September 15th deadline and the October the 15th deadline.

This way, you know if there's a major disaster declaration that you have the peace of mind that there is an automatic extension or postponement, whatever you want to call it according to the statute.

April Walker: Good to know.

Another topic, hopefully, our listeners are aware that if you are a CPA, you're practicing in a disaster area that's different than the taxpayer.

They can still be considered an affected taxpayer if the records that you have that used to file the tax return are in that covered disaster area.

I know it can be a little bit tricky because in a perfect world, the ZIP code of the taxpayer is going to trigger the disaster relief.

I know we know it doesn't work all the time, but that's how it does it.

What is the mechanism to make it happen to get that relief if you are the CPA?

Gerard Schreiber: If you are in a disaster area or your records are in a disaster area and you are not located in the disaster area, then you need to call the disaster hotline.

That number is on the IRS website and to have the IMF, the individual master file or the BMF, the business master file marked as being affected by the disaster.

That's supposed to be done by the disaster hotline.

Now, I will say this that as a consequence of Milton and Helene last summer, and the number of people that were affected, that the disaster hotline was inundated with calls.

As a consequence, IRS had to shift people from other places to take those calls.

That caused some inconsistent information to be given out.

I'm sure you know as I'm saying this, these disasters have their own language, their own buzzwords that are going to be foreign to a lot of IRS employees.

You can know that in the internal revenue manual, it'll tell you what's supposed to happen.

It's either supposed to be an O freeze.

O is in Oscar or S is in Sam, freeze on the taxpayer's individual master file or the business master file.

Now, one other thing as a consequence of the inconsistent information and the confusion that we had this last year with these hurricanes, it is suggested that if you are calling on behalf of a taxpayer that you have a 2848, and to also keep a record of the number you are calling from, the number you are calling to, who you are talking to, their badge number and the length of the call.

Just the normal things that you would do when you call the practitioner priority line.

Do you have to do that also just as a matter of due diligence?

April Walker: Another publication that you mentioned probably also goes into some of the details on that and gives the phone number specifically that people need to call.

But that's a good point you made, Gerry about making sure that people have documented it because the IRS hasn't always got that exactly right.

You might come back with a late notice, and so you need to be able to go back and have your documentation to be able to write that letter.

Gerard Schreiber: Yeah, there have been erroneous notices coming out in Florida, CP59 for Hurricane Beryl.

I'm sure that there's other ones, but I did hear about that for Hurricane Beryl last year.

As they explained to me 20 years ago, the IRS, the man said, it's a big system, and it's like turning an oil supertanker around in a bathtub, trying to change things with IRS.

We have to be patient and we have to be cautious in what we're doing, and also to have procedural knowledge of what's going on to know about these things in the code and in the internal revenue manual for when you're dealing with the IRS personnel.

April Walker: Another thing to really note that we're going to be posting this right before on April 11, and so that April 15th date is coming up really quickly and there are some disasters.

There's actually disasters in North Carolina where I live from the Hurricane Helene that postponement date is May the 1st.

What do we need to tell people around an extension?

We got the 4/15 extension.

Normally, if you're filing an extension, a best practice would be to do it electronically.

But what do we need to let our listeners know about those extensions for that postponement period that happens after April 15th?

Gerard Schreiber: Today, IRS issued a news release, IR 2025-41.

I repeat IR 2025-41 to talk specifically about the extensions for the May the 1st deadline.

Now, there's three ways to file an extension.

One is to do it electronically online with IRS.

The other would be to use commercial software, and the third would be to file a paper extension.

Now, the first two, if you do it electronically online at the IRS website, their system will only allow filing of extension until April 15th.

It will not allow electronic filing of an extension past April 15th.

Commercial software, again, does not have a disaster feature, and it's the same thing.

They will not allow filing of an electronic extension by April 15th.

A paper filing, you could file by paper before May the 1st, and theoretically be covered if you trust filing by paper and mailing it in.

Now, if you do the paper filing, I would say to be familiar with Code Section 7502, which deals with proof of filing or mailing.

I think that it be mail certified.

Anybody's going to do that.

They need to re-read the code section.

I can't give you what it is verbatim right now, but I know that that covers proof of filing, 7502.

You should be familiar with that.

But the best thing to do is to file electronically.

Let me say this for years, we've been fighting about having a disaster feature put into software, and it's like fighting City Hall, and so we haven't had any success, and even though the disasters are multiplying.

Let me say this for procedural purposes and practical purposes, and I know how much trouble it is, is that with the people aside from a short form.

If you have any return with complexities that's covered by these disasters, get a 2848 if you have to talk to IRS and to file the extensions electronically to where you have an acknowledgment to be on the safe side for procedural purposes.

April Walker: You may not know for sure if you're going to need that extension.

But if you think you will, it seems like best practice to just go ahead and file it by April 15th and do it electronically.

Then if you're ready to go ahead and file, you can certainly go ahead and file by that May 1st date.

No problem.

Brandon, we're going to shift to you for a few minutes to see if you have any advice for our listeners as they maybe helping their clients or they themselves might be dealing with concerns after a disaster.

Brandon Nishnick: Thank you, April.

I just wanted to highlight the importance of maintaining good records and support for your basis calculations, some things.

This is a very in-depth return.

We want to make sure all your paperwork is intact and all your information is secured.

For disaster tax relief returns, we recommend filing and paying on the same day.

We feel that doing so otherwise, will result in a notice and a lot of unnecessary time that you don't really need to be dealing with.

Just go ahead file and pay on the same day.

Then last but not least is we have a state disaster tax relief guide, of course.

What we've all talked about right now in this episode was federal tax relief, but of course, there is state tax relief and we do have a state disaster tax relief guide that provides varying information on how states provide different tax relief.

I recommend this, especially if you have a client that has a multi state client.

This is very useful but be sure to check it out, and we will include a link to that in this podcast.

April Walker: Yeah, we will.

Thanks a lot, Brandon, and good thoughts there to think about.

We have gotten some questions around that around whether you can go ahead and file and just wait for the payment date.

Although, you probably can do that, we just think it's probably not the best idea to separate it.

You wouldn't want to have to deal with a notice that you already might have to be dealing with anyway.

In closing, Gerry, do you have any final thoughts or anything you want to share with our listeners today with regard to disasters?

Gerard Schreiber: No, just what I had said, think about what you're doing.

The best practices is the most important thing, the procedural things.

You want to have all your backup in place for the filing dates and the payments, and things like that.

The casualty loss is a mechanical calculation, but getting the returns in the system timely is the biggest thing because that's going to be the most important thing.

The other thing is fall into normal flow of filing a tax return.

But with disasters, there's so many procedural items that come up with timing and the way that the returns are processed.

I said it's a big system.

There's a lot of hands involved and so when you have a lot of hands involved, there's a potential to have some things go astray or whatever you want to call.

April Walker: A lot of times as taxpayers are dealing with disasters, the last thing on their mind is their tax return.

We want to be able to help them manage through that.

But then also, of course, they have their tax obligation, so we want to make that as easy as possible.

Gerard Schreiber: We're here to help everybody get these returns through the system.

That's my job.

I want to help everybody, all our members get the returns through the system.

I don't want to do your returns, but whatever it takes to get the returns through the system, that's what we're here for.

April Walker: I thought I was like, Oh, Gerry is offering his services to prepare returns.

That's what I heard.

In closing on this podcast, this podcast is tax section odyssey, so we like to think of ourselves as taking a journey together towards a better profession, but I like to get a glimpse of our other journeys outside of the world of tax.

Gerry, do you have anything on the horizon for post tax season?

Any trips or anything fun planned?

Gerard Schreiber: I don't know right now.

If I did, I'm worried about the situation with Washington and tariffs, and foreign travel.

I don't know what I would do right now.

It's definitely caused me to rethink everything that whatever I had in mind, I just don't know.

April Walker: You're hunkering down.

It's a fair concern.

What about you, Brandon?

Do you have any fun trips planned?

Brandon Nishnick: Nothing too.

Maybe go to the beach, go to see if we can get some more sand dollars.

April Walker: The beach is always a nice location, and that's one of the beauties of living in North Carolina.

It is a couple hours from the coast.

Brandon Nishnick: How about you?

April Walker: I'm always planning my next travel location.

I think I'm going to Florida next.

We'll see.

Before hurricane season, so that's probably smart.

Brandon Nishnick: Very nice.

April Walker: Gerry and Brandon, I'm so appreciative of our time together today.

Again, this is April Walker from the AICPA tax section.

This community is your go to source for technical guidance and resources designed especially for CPA tax practitioners like you in mind.

This is a podcast from AICPA and CIMA together as the Association of International Certified Professional Accountants.

You can find us wherever you listen to your podcast and we encourage you to follow us so you don't miss an episode.

If you already follow us, thank you so much.

Please feel free to share with a like minded friend.

You can also find us at aicpa-cima.com/tax and find our other episodes, as well as getting access to those resources that we mentioned during our discussion today specifically around disaster relief and those types of resources.

Thank you so much for listening, and wishing everyone rest and recovery as you come out of filing season.