Affected by Hurricane Katrina? Remember to Claim Those New Tax Benefits
Release Date: December 16, 2005
Release Number: 1605-132
» More Information on Alabama Hurricane Katrina
MONTGOMERY, Ala. -- It's the time of year when we begin to think about filling out tax forms and what our tax liabilities might be. Fortunately, for Alabamians who suffered losses from Hurricane Katrina, there is tax relief.
There are some important new benefits under the Hurricane Katrina relief bill passed on September 23, 2005. Taxpayers who itemize should plan to take full advantage of the changes by carefully reviewing the instructions and by discussing them with their tax consultants or an Internal Revenue Service representative.
Here are some key points to remember in the new tax law:
- States that filers who itemize no longer have to deduct 10 percent of adjusted gross income and a $100 deductible to claim disaster losses. You can claim the full amount of a disaster loss.
- Allows Katrina victims to withdraw up to $100,000 without tax penalties from certain retirement accounts, such as 401(k) plans and Individual Retirement Accounts, to pay for disaster-related needs.
- Suspends limits on individual cash contributions made to qualified charities beginning August 28, 2005 through Dec. 31, 2005.
- Provides a tax benefit for people who volunteer to take in Katrina victims, a $500 deduction for each person they house for at least six months, up to a cap of $2,000.
- Extends certain filing and payment deadlines. Check with the IRS or your tax consultant to see which deadlines may apply to you.
- Offers the option to file an amended 2004 return or wait until the end of the year and claim the loss on your 2005 return.
"This has been an unprecedented disaster. The new tax benefits recognize that every penny taxpayers save will help them in rebuilding their lives," said Michael Bolch, FEMA's federal coordinating officer for the Alabama recovery.
When filing, be sure to write "Hurricane Katrina" in red ink at the top of the tax forms or any documents you attach, to alert the IRS tax examiner. It is also important for any disaster area taxpayer who receives a penalty notice from the IRS to call the number on the notice to receive penalty abatement.
For answers to Hurricane-related tax questions, contact the IRS disaster hotline at 866-562-5227 or online at www.irs.gov.
Last Modified: Friday, 16-Dec-2005 11:00:48