What hurricane tax relief options are available to your organization?
The costs of Hurricanes Harvey and Irma keep piling up and hurricane season is still in high gear. As noted by Vox, the conservative projection for Harvey's damage is $65 billion, with high-end estimates hitting $190 billion. Details on Irma's cost are still being tallied but estimates range from $50 to $100 billion. In perspective, even low-end totals are a little over half a percent of U.S. GDP.
While recently-drafted legislation speaks to the needs of individuals and families living in affected areas, organizations struggling to find their footing after the storm may be unsure what type of hurricane tax relief, emergency loan options and other assistance is available. Here are a few thing you need to know.
The IRS has announced several tax relief programs to help businesses get back on their feet after Harvey and Irma. Filing deadlines for businesses in affected areas — the IRS Tax Relief in Disaster Situations keeps a running list — have automatically been pushed back to Jan. 31, 2018. This includes any returns already on extension or extensions that ran out on Oct. 16, 2017.
In addition, the IRS is waiving late-deposit fees for federal payroll and excise taxes that were due on or after September 17 and before October 2, 2017, which are typically due during the first 15 days of a disaster period, provided that deposits are made by October 2. Businesses that operate outside of the designated disaster area but rely on reports from impacted organizations can also apply for deadline relief by calling the IRS disaster hotline at 866-562-5227.
It's also worth noting that the Financial Crimes Enforcement Network (FinCEN) has pushed back the due date of their Report of Foreign Bank and Financial Accounts (FBAR) to Jan. 31, 2018. It is regularly due Oct. 15, 2017. According to the DOL, the Employee Benefits Security Administration (EBSA) is temporarily waiving specific deadlines for retirement and group health plans.
Claims and Credits
Along with hurricane tax relief in the form of pushed-back filing dates, organizations can also choose how they wish to claim uninsured or unreimbursed disaster-related losses. Specifically, finance leaders can choose if they want to claim these losses in the year they occurred — the 2017 return filed next year, or the year prior (2016). You should evaluate your current losses, gains and potential outcomes before making this choice.
Hurricane relief legislation that includes tax credits is also in the draft stage. "The tax writing committees are working on a tax-based hiring incentive to be included in proposed relief legislation associated with Hurricane Harvey and Irma," says Charles Asensio, Vice President, Government Affairs at ADP Tax Credit Services.
According to Asensio, Finance Committee Chairman Sen. Orrin Hatch (R-UT) and Sen. John Cornyn (R-TX) are using the 2005 Katrina Tax Relief Act as their template. Asensio notes that the 2005 legislation included two key provisions: both a Work Opportunity Tax Credit (WOTC) credit for employers who hired employees who lived in hurricane-affected zones on the day the hurricane struck, and a retention credit for affected employers who kept employees on payroll even if their businesses were rendered inoperable.
"There is support for a hurricane tax package and prior versions for other hurricanes have included hiring credits," Asensio says. "Assuming the tax writers stay with those models, there is a good chance that a hiring credit will be included in any hurricane tax relief package enacted this fall."
While the Federal Emergency Management Agency (FEMA) does not offer any direct loan or grant assistance to businesses, it is possible to obtain a loan through the Small Business Administration (SBA). Organizations of any size are eligible for up to $2 million for physical damage, according to the SBA. There are three steps to the SBA loan process:
Using the SBA's secure site, organizations can describe the nature and value of their damages and submit an application for consideration. Applicants can also apply by mail or in-person at a disaster center.
2. Undergo a Review and Decision is Made
The SBA reviews existing credit, conducts an inspection to verify losses, estimates total physical loss and determines eligibility. The SBA attempts to provide a decision within four weeks.
3. Dispersing of Funds
Once the necessary loan documents have been signed, an initial disbursements will be made within five days, and loans may be adjusted to meet changing circumstances such as increased repair costs or additional insurance proceeds.
Hurricanes Harvey and Irma have wreaked havoc on the United States, causing both massive property damage and impeding business operations. While many finance leaders may be facing an uphill battle to get budgets back on track and address physical losses, help is available in the form of hurricane tax relief, claim adjustments and loan assistance.
To get the latest information on Employee Retention Tax credits, register for the webinar, Maximize Your Tax Credits Capture - From Employee Retentation Credit and Beyond.
*Information current as of September 25, 2017.
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