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Texas has received a disaster declaration issued by the Federal Emergency Management Agency in the wake of the catastrophic winter storms that struck the state in mid-February. The declaration opens the door for several valuable tax relief measures, including tax filing and payment deadline extensions as well as other tax relief opportunities.

Tax Deadlines Extended to June 15

Texas taxpayers have been given extended time to file and pay federal taxes due on or after February 11, 2021, through a newly extended deadline of June 15, 2021. The tax relief is given to individuals and households affected by the recent severe winter storms if they reside or have a business anywhere in Texas (since all 254 Texas counties are part of the federal disaster declaration).

Which tax deadlines are included? According to the IRS,  it is “most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; annual information returns of tax-exempt organizations; and employment and certain excise tax returns), that have either an original or extended due date occurring on or after February 11, 2021, and before June 15, 2021.”

In short, Texas residents and business owners have until June 15, 2021, to:

  • File and pay 2020 business tax returns normally due March 15.
  • File and pay 2020 individual and business tax returns normally due April 15.
  • File and pay extension payment and 2021 first–quarter estimated tax payments normally due on April 15.
  • File and pay quarterly payroll and excise tax returns normally due on April 30.
  • File 2020 tax-exempt calendar-year basis tax returns normally due May 17.
  • Make 2020-eligible contributions to IRAs.

Penalties on payroll and excise deposits due on or after February 11, 2021, and before February 26, 2021, will be abated if the tax deposits are made by February 26, 2021. Certain state and local tax deadlines have also been extended.

If you’re not a Texas resident or business owner, you may also be eligible for relief if the “records necessary to meet a deadline…are in the covered disaster area”; you are a relief worker affiliated with a recognized government or philanthropic organization assisting in relief activities; or you or a joint taxpayer were physically in the covered disaster area at the time of the storms and were killed or injured.

Additional Tax Opportunities

The extended deadline to file 2020 taxes gives you extra time to work with your tax advisor to identify and calculate losses and weigh tax opportunities associated with the storm. Losses from this disaster (including repair costs), for instance, are deductible on either 2020 or 2021 returns. If you believe that tax rates will rise in 2021, you may choose to wait and apply the losses then.

Don’t forget that losses and relief are still in play for the COVID-19 federal disaster. Balancing relief, tax breaks, and the use of PPP money with new storm-related losses and relief can get confusing. And if you’ve already worked with your home insurance provider to seek storm damage coverage, you may have discovered that the exact language you must use and the steps you must take are precariously specific. Receiving tax breaks from the IRS due to disaster can be a process that’s just as meticulous. For instance, the IRS states that affected taxpayers claiming the disaster loss on a 2020 return should put the disaster designation, “Texas – Severe Winter Storms,” in bold letters at the top of the form and include the disaster declaration number, FEMA 4586, on that return.

Keep your receipts, particularly for supplies, repairs, and other costs. If you’ve paid out-of-pocket expenses to work and live away from your home or business due to the storms, be sure to tell your tax advisor (it may be deductible if your insurance doesn’t cover it). It’s these details that can add up to much-needed tax breaks if you catch them and know when and how to apply them. For questions, feel free to contact us. But don’t wait! Start planning as soon as possible to uncover the best tax breaks.

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