From the straight line winds of the “Derecho” that moved from the Midwest to the East Coast this past summer to the most recent weather challenge of hurricane Sandy, businesses owners in the path of severe storms often have an overwhelming amount of details to handle. In the aftermath of a storm, dealing with insurance and financial issues on both the personal and professional level at the same time can test the fortitude of even the most seasoned executive. At times of natural disasters, the government’s IRS does allow certain tax breaks for natural disasters, which may help make the other details just a little more bearable.
1. Additional time for filing routine reports:
For businesses that file quarterly income tax with the IRS, additional time in the wake of the natural disaster is generally granted. Communicating with the local office of the IRS can be helpful for setting up delayed payments and reports. In areas most central to the damage the extension is automatically granted. This can give a business leader a little extra time to spend on addressing the more immediate needs that follow after a natural disaster strikes. Business owners should still communicate to the IRS as soon as possible so that the delay can be documented. For more information about the guidelines related to routine paperwork and filing extensions, see: Tax Relief in Disaster Situations.
2. Deductions for what insurance doesn’t cover:
From the time the disaster strikes (and even before during preparations), it is important to keep all the receipts that document purchases. After a national disaster, the IRS allows business deductions of losses not covered by insurance. For personal loss the amount not covered by insurance is not a straight deduction, but calculated as a percent of income, see: here. Consulting a knowledgeable CPA may be the best idea for sorting out losses and reporting guidelines especially when the business is operated from a home that was also damaged in the storm or other disaster. For information related specifically to losses incurred during hurricane Sandy, see: Help for Victims of Hurricane Sandy and here.
3. Other deductions:
While a tax deduction for losses is one side of the coin, the other side is tax deductions for certain qualifying purchases during the rebuilding process. For instance using energy efficient HVAC systems and lighting may also help a business when it comes time to file taxes during the next tax cycle. While many of the tax credits for upgrading to more energy efficient appliances and windows expired in 2011, a number of other attractive incentives still exist. While enlisting the services of a reputable accountant is helpful to find out whether or not these incentives make sense in a particular set of circumstance, a business owner can get the basic information about these deductions.
Getting through the tough times that follow a natural disaster can be both sad and frustrating. For business owners struggling to return a business life and a family life back to normal, the situation can be particularly complicated. Understanding options and resources available is one way to help make the task a little more manageable. For more information about business considerations when it comes to preparing for and recovering from a natural disaster, see: Dealing with Disaster.
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