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Tax Relief for Angelenos

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Photo:Getty
Photo:Getty

On Thursday, the IRS announced postponements for various tax deadlines for businesses and residents in Los Angeles County. Qualified taxpayers now have until October 15, 2025, to file individual and business tax returns, make payments, and handle other time-sensitive tax-related obligations. If your primary and/or business address is in Los Angeles County, you are considered a qualified taxpayer under this relief.

Additionally, the IRS has also provided information about Qualified Disaster Relief Payments that provide financial relief to individuals impacted by the fires.

What Are Qualified Disaster Relief Payments?

Qualified Disaster Relief Payments include amounts paid to individuals(not businesses) for:

  1. Reimbursement or payment for necessary expenses:

    • Personal, family, living, or funeral expenses not otherwise covered by insurance or other means.

    • Repairs or rehabilitation of a personal residence, or repair/replacement of its contents, to the extent these are attributable to the qualified disaster.

  2. Reimbursement for specific transportation-related expenses:

    • Payments made by transportation providers due to death or personal physical injuries incurred as a result of the disaster.

Exclusions and Taxability of Payments

While many disaster-related payments are excludable from gross income, some payments do not qualify as disaster relief under IRS rules. Here’s what you need to know:

  • Payments to businesses: Businesses cannot exclude disaster relief payments from gross income.

  • Income replacement payments: Payments meant to replace lost income are not qualified disaster relief payments and must be reported as taxable income.

  • Insurance-compensated expenses: If reimbursed expenses are expected to be compensated by insurance or other sources, they must be reported as taxable income.

If you receive Qualified Disaster Relief Payments for the two specific reasons listed above, you will not need to include these payments on your Form 1040, U.S. Individual Income Tax Return (even if reflected on a Form 1099-MISC). For amended returns or reporting issues, ensure you exclude qualified payments as appropriate.

Additional Federal Disaster Benefits

When a disaster is declared by the President, taxpayers are entitled to additional protections:

  1. Suspension of Collection Actions:

    • All pending IRS collection actions are suspended for at least 60 days.

  2. Suspension of Interest Accrual:

    • This is one of the rare circumstances where the accrual of interest on underpaid taxes is halted during the suspension period.

  3. IRS Notifications:

    • Taxpayers in IRS examination or collection status should receive a CP14C letter, confirming the suspension of actions against them. If you believe you qualify but have not received this notice, reach out to the IRS or contact us for assistance.

We're Here to Help

Clients on retainer can call Samir directly to discuss:

  • The taxability of relief payments,

  • Specific exclusions, and

  • How to handle extended deadlines for filing and payments.

In times of crisis, understanding your rights and tax responsibilities is essential. Contact us today for personalized support.

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