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State grants tax relief to victims of hurricanes Katrina, Rita, and Wilma Supersedes Public Service Bulletin Dated January 13, 2006)

PURPOSE OF BULLETIN

To inform staff that President Bush declared parts of Alabama, Florida, Louisiana, Mississippi, and Texas, federal disaster areas as a result of the August, September, and October hurricanes. This allows disaster victims to receive an extension to file tax returns and submit tax payments, along with special tax treatment for claiming a disaster loss.

BACKGROUND

President Bush declared federal disasters for areas affected by Hurricane Katrina on August 30, 2005, for Hurricane Rita on September 23, 2005, and Hurricane Wilma on October 23, 2005.

AFFECTED TAXPAYERS

Affected taxpayers include:

  • Individuals and businesses located in the disaster area.
  • Taxpayers whose records are located in the disaster area.

FILING EXTENSIONS

Hurricane Katrina: Taxpayers hit hardest by this disaster have until October 16, 2006, to file the following individual income tax returns.

  • 2004 individual income tax returns, originally due on April 15, 2005. The previous grant of disaster relief postponed the due date to Aug. 28, 2006.
  • 2005 individual income tax returns, originally due on April 15, 2006. The previous grant of disaster relief, postponed the due date to Aug. 28, 2006.

Affected individual taxpayers in the hardest hit areas of Katrina may also request an additional six-month extension to April 15, 2007, to file and/or pay under Revenue and Taxation Code section 18567. The request must be in writing (a copy of the federal application under IRC 6081 or 6161 is acceptable) and must be filed on or before October 16, 2006.

Note: Interest starts to accrue after the October 16, 2006, postponement date. However, no late file and late payment penalties will be imposed during the six-month postponement period (RTC 18567(c).)

A full listing of the affected counties is described in news release IR-2006-30 and in Notice 2006-20.

(Source: IRS Notice 2006-20 & 2006-56)

Hurricanes Katrina, Rita and Wilma: Katrina victims who were not in the hardest hit areas of Katrina and the victims of Rita and Wilma had until February 28, 2006, to file tax returns and submit tax payments for any tax return or payment that became due on or after the date the hurricane struck. The FTB will cancel interest and any late filing or late payment penalties that would otherwise apply.

This relief includes the September 15, 2005, date for Hurricane Katrina victims for estimated taxes and for calendar-year corporate returns with automatic extensions.

(Source: IRS Publication 4492, Information for Taxpayers Affected by Hurricanes Katrina, Rita, and Wilma).

CLAIMING THE DISASTER LOSS

Special tax rules apply to disaster losses. Taxpayers can claim the loss in the tax year in which the disaster occurred or in the tax year before the disaster occurred. For more information refer taxpayers to FTB Publication 1034, How to Claim a State Tax Deduction for Your Disaster Loss, at www.ftb.ca.gov.

Note: Taxpayers needing copies of lost or damaged state returns should complete Form 3516, Request for Copy of Tax Return. Disaster victims receive copies of tax returns for free. Advise the taxpayer to print “Hurricane Katrina,” “Hurricane Rita,” or “Hurricane Wilma” in red at the top of the request.

IDENTIFICATION FOR DISASTER AREA RETURNS

Taxpayers claiming the disaster loss should write “Hurricane Katrina”, “Hurricane Rita”, or “Hurricane Wilma” in red ink at the top of the tax return to alert the FTB to expedite the refund. If e-filing, taxpayers should follow the software instructions to enter the disaster information.

 

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