The Internal Revenue Service (IRS) and Department of Labor (DOL) have announced new deadline filing extensions and tax relief measures to individuals and businesses affected by Hurricane Sandy. According to an IRS notice issued on November 2, qualified disaster relief payments made to individuals by their employer can be excluded from those individuals’ taxable income. Payments deemed “qualified disaster relief” include amounts to cover necessary personal, family, living or funeral expenses that were not covered by insurance, as well as expenses to repair or rehabilitate homes or to repair/replace the homes’ contents to the extent they are not covered by insurance.
Furthermore, the IRS has announced that it is granting additional tax relief to individuals and businesses affected by the storm in Connecticut, New Jersey and New York. Specifically, the agency will postpone certain tax filing and payment deadlines that started at the end of October. According to the IRS notice:
affected individuals and businesses will have until Feb. 1, 2013 to file these returns and pay any taxes due. This includes the fourth quarter individual estimated tax payment, normally due Jan. 15, 2013. It also includes payroll and excise tax returns and accompanying payments for the third and fourth quarters, normally due on Oct. 31, 2012 and Jan. 31, 2013 respectively. It also applies to tax-exempt organizations required to file Form 990 series returns with an original or extended deadline falling during this period.
The agency states that it will abate any interest, late-payment or late-filing penalty that would have otherwise applied. The notice explains also that the IRS is waiving failure-to-deposit penalties for federal payroll and excise tax deposits that would have been due on or after the location was declared a disaster area, and before November 26, 2012, so long as the deposits are made by November 26.
On October 31, the IRS announced that it was granting taxpayers and tax preparers affected by the storm until November 7 to file returns and accompanying payments that would have been due on that date. It is anticipated that the IRS will offer additional guidance to employers as the damage areas are further assessed.
DOL Extends VETS Reporting
The DOL’s Veterans’ Employment and Training Service (VETS) has also announced that it is extending until November 9, 2012 the filing deadline for VETS 100 and/or 100A report(s) required under the Vietnam Era Veterans' Readjustment and Assistance Act of 1974 (VEVRAA), as amended, for the 2012 cycle. According to the notice posted on the VETS webpage, all paper reports and electronic files received at the department service desk by November 9 will be included as part of the 2012 filing cycle and will not be considered late. The original deadline had previously been extended a month until October 31.
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To further assist employees affected by Hurricane Sandy, the Internal Revenue Service (IRS) has announced that it is easing procedural and administrative rules to allow 401(k)s and similar employer-sponsored retirement plans to more readily make loans and hardship distributions to employees and their family members who live or work in a designated disaster area. Ordinarily, laws regarding qualified employer plans impose a number of restrictions on providing loans and distributions from those plans. For example, a pension plan hardship distribution is generally included in an employee’s gross income and subject to a 10% early withdrawal tax. As more fully discussed in IRS Announcement 2012-44, (pdf) the agency is relaxing these rules in order to make emergency funds more accessible to storm victims. Continue reading this entry at Littler's Employee Benefits Counsel.