IRS Provides Tax Relief for Victims of Kentucky Tornadoes

Thoughtware Alert Published: Dec 15, 2021
IRS building

On December 13, 2021, the Federal Emergency Management Agency (FEMA) announced disaster declarations for several Kentucky counties including Caldwell, Fulton, Graves, Hopkins, Marshall, Muhlenberg, Taylor, and Warren counties.1 Following that announcement, the IRS is providing tax relief to taxpayers who live in or have a business in these counties and were affected by storms, tornadoes, and flooding that took place beginning December 10, 2021. 

Filing/Payment Deadline Relief

Taxpayers required to file returns with an original or extended due date on or after December 10, 2021, and before May 16, 2022, with an address of record in an identified disaster area have until May 16, 2022, to file most tax returns and pay taxes that were originally due during this period. This includes 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; Form 5500 series returns and employment and certain excise tax returns; and annual information returns of tax-exempt organizations.

Specifically noted in the IRS news release is relief for farmers who typically file their returns by March 1 and forgo making estimated tax payments throughout the year. This relief will allow those farmers until May 16, 2022, to file their 2021 return and pay any tax due with no penalty for underpayment of estimated taxes. 

Also important to note is that affected taxpayers will have until May 16, 2022, to make 2021 IRA contributions.

Taxpayers with an estimated income tax payment originally due on January 18, 2022, or April 18, 2022, won’t be subject to penalties for failure to pay estimated tax installments if such payments are made on or before May 16, 2022.

Postponement of time to file and pay doesn’t apply to information returns in the W-2, 1094, 1095, 1097, 1098, or 1099 series; to Forms 1042-S, 3921, 3922, or 8027; or to employment and excise tax deposits. Penalties for deposits due on or after December 10, 2021, and before December 27, 2021, will be abated as long as the tax deposits were made by December 27, 2021.

State & Local Tax Compliance

On December 16, 2021, the Kentucky Department of Revenue (DOR) announced adoption of the federal relief provisions for filing of income tax returns, including payment of tax due. This extension allows affected taxpayers until May 16, 2022, to file Kentucky income tax returns and submit tax payments for individual income tax, corporate income tax, income tax withholding, and limited liability entity tax for all returns and/or payments due on or after December 10, 2021, and before May 16, 2022.

Consistent with the IRS, the DOR relief also applies to quarterly estimated tax payments normally due on January 18, 2022, and April 18, 2022.

Late filing and payment penalties will be waived for affected taxpayers seeking this relief, but Kentucky’s tax laws have no provision for the waiver of interest.  

Sales & Use Tax

The extension to file and pay taxes does not apply to sales tax or other types of taxes. However, the DOR will provide a 30-day extension on the filing of returns for sales and excise taxes along with waivers of any penalty for late filings and payments related to the current disaster impact. Taxpayers seeking extensions for sales and use taxes should contact the Sales and Use Tax Division at 502.564.5170.

The federal disaster declaration also activates the provisions of KRS 139.519, which provides for a refund of Kentucky sales and use tax paid for building materials permanently installed in the repair or replacement of structures damaged in counties covered under a federal disaster relief declaration. Refunds apply to purchases made on or after December 12, 2021, the date of the federal disaster declaration for individual relief. Additional information on how to submit a claim for refund can be found here.

Loss Reporting

Affected taxpayers in a federally declared disaster area have the option to claim disaster-related casualty losses on their federal income tax returns either in the tax year of the loss or on the prior year’s return. Claiming the loss on an original or amended return for the prior tax year may provide more timely benefits, but consideration should be given to yearly tax rate differences and other taxpayer-specific factors.

Contributions to Disaster Victims

There are many outlets organizing assistance for disaster victims. Please exercise caution while selecting organizations to receive your contributions. Philanthropists can evaluate an unfamiliar organization by verifying its tax-exempt status and how it spends its contributions through the Tax Exempt Organization Search website.

Action Required

Federal late filing or late payment penalties for qualifying taxpayers should automatically be abated if the address requirements are met. If taxpayers receive a penalty assessment despite having a qualifying address of record, they should contact the IRS at the number on the notice to request abatement under the disaster relief provisions.

Taxpayers affected by these disasters who reside or have a business outside the covered disaster area should call the IRS disaster hotline at 866.562.5227 to request the above federal relief. Additional information and contacts are available at https://www.disasterassistance.gov/.

For more information, reach out to your BKD Trusted Advisor™ or submit the Contact Us form below.
 


Covered counties are current as of the date of this publication. An up-to-date listing can be found at https://www.irs.gov/newsroom/tax-relief-in-disaster-situations.

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