Aug. 14, 2002

MILWAUKEE -- Property owners in Wisconsin’s eight counties declared federal disaster areas because of the June 21-25 storms and flooding may be eligible for special tax relief, according to the Internal Revenue Service. Taxpayers in a Presidentially-declared disaster area have a choice as to when they may claim related casualty losses.
 
Donna Migazzi, spokeswoman for the IRS in Wisconsin, explains:  “If you’re in a county that’s declared a federal disaster area, you have the option of claiming your disaster-related losses on your 2001 or 2002 tax return. If you already filed your 2001 return, you can amend your return by filing Form 1040X. This allows you to get any refund resulting from the casualty loss now, instead of waiting until next year when you file your 2002 tax return.”

Migazzi said that taxpayers filing an amended 2001 return should put the words “WISCONSIN STORM/FLOODS” in red ink at the top of the Form 1040X, so that IRS can expedite the processing of the refund. To be eligible for the option of amending a 2001 tax return, the damaged property must be in one of the eight Wisconsin counties designated as a federal disaster area: Adams, Clark, Dunn, Marathon, Marinette, Portage, Waushara, and Wood.

Taxpayers with disaster-related losses should consider in which year the deduction benefits them most. When claiming a casualty loss for personal property, taxpayers must subtract $100 from each casualty’s unreimbursed loss, then subtract 10 percent of their Adjusted Gross Income for the year from the total losses. Adds Migazzi, “In order to ensure that you receive the maximum benefit allowed by law, you have until April 15, 2003, to decide whether to amend your 2001 return or to claim your disaster loss on your 2002 return.”

Ordinarily, casualty losses are based on the difference between the value of the property before and after the damage occurred. Photographs taken after the damage is done but before cleanup begins can help document a loss, the IRS says.

IRS Form 4684, “Casualties and Thefts,” and its instructions and Publication 547, “Casualties, Disasters, and Thefts,” contain further details on determining the amount of a deductible casualty loss. In addition, Publication 584 is a workbook that can help you compile a room-by-room inventory of damage to your home. Publication 584B is a similar workbook for business taxpayers.

The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers who need them to file amended returns claiming casualty losses. Such taxpayers should put “WISCONSIN STORM/FLOODS” in red ink at the top of Form 4506, “Request for Copy or Transcript of Tax Form,” and submit it to the IRS.

Although the IRS is not granting additional time to file returns or pay taxes, it will consider requests for penalty abatements based on reasonable cause. Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain that the disaster impacts them so that the IRS can provide appropriate consideration to their case.

For the purposes of this tax relief, affected taxpayers include individuals and businesses directly impacted by the disaster, including relief workers.

The IRS toll-free number for general tax questions is 1-800-829-1040.