NAS-2003-57, May 15, 2003
(updated 5/20/03 to add Hardin, Morgan and Sumner counties to the Tennessee area)
(updated 5/28/03 to add six counties to the Alabama area and 14 counties to the Tennessee area)
(updated 6/2/03 to add 5 counties to the Tennessee area and to give an ending date for the disaster period)
(updated 6/10/03 to add 4 counties to the Tennessee area)

NASHVILLE – The Internal Revenue Service today announced special tax relief for Alabama and Tennessee residents in the Presidential Disaster Areas that were struck by severe storms and tornadoes beginning May 4 and ending May 30, 2003.

The Alabama disaster area includes 38 counties: Baldwin, Barbour, Bibb, Blount, Bullock, Calhoun, Chambers, Cherokee, Clarke, Clay, Cleburne, Colbert, Coosa, Cullman, DeKalb, Escambia, Etowah, Jackson, Jefferson, Lauderdale, Lawrence, Lee, Limestone, Macon, Madison, Marshall, Mobile, Monroe, Morgan, Randolph, Russell, Shelby, St. Clair, Talladega, Tallapoosa, Tuscaloosa, Walker and Washington.

The Tennessee disaster area includes 69 counties: Anderson, Bedford, Benton, Bledsoe, Blount, Bradley, Cannon, Carroll, Cheatham, Chester, Cocke, Coffee, Crockett, Cumberland, Davidson, Decatur, DeKalb, Dickson, Dyer, Fayette, Gibson, Giles, Hamilton, Hardeman, Hardin, Haywood, Henderson, Henry, Hickman, Houston, Humphreys, Jefferson, Knox, Lake, Lauderdale, Lawrence, Lewis, Lincoln, Loudon, Macon, Madison, Marion, Marshall, Maury, McMinn, Meigs, Monroe, Montgomery, Morgan, Obion, Perry, Polk, Rhea, Roane, Robertson, Rutherford, Sequatchie, Sevier, Shelby, Smith, Stewart, Sumner, Tipton, Trousdale, Warren, Wayne, Weakley, Williamson and Wilson.

For the purposes of this tax relief, affected taxpayers include individuals and businesses located in a disaster area, those whose tax records are located in a disaster area, and relief workers. The same relief will also apply to any counties added to either of these Presidential disaster areas.

The IRS is granting affected taxpayers an extension of time to July 14 to file tax returns or make tax payments that have either an original or extended due date falling between May 4 and July 14, 2003. The IRS will abate interest and any late filing or late payment penalties that would apply during these dates to returns or payments subject to these extensions.

The IRS is giving affected taxpayers until July 14 to perform certain other time-sensitive actions described in Treasury Regulation § 301.7508A-1(c)(1) and Rev. Proc. 2002-71, 2002-46 I.R.B. 850, that are due to be performed during the period May 4 through July 14, 2003. This relief includes the filing of Form 5500 series returns, in the manner described in section 8 of Rev. Proc. 2002-71.

This extension to file and pay does not apply to information returns, or to employment and excise tax deposits. However, the IRS may abate penalties on payroll tax deposits during this period for affected taxpayers due to reasonable cause.

To qualify for this relief, affected taxpayers should put “May Storms/Tornadoes” in red ink at the top of the return, except for Form 5500, where filers should check Box D in Part 1 and attach a statement, following the form’s instructions. Individuals or businesses located in the disaster area – or taxpayers outside the area that were directly affected by these storms – should contact the IRS if they receive penalties for filing returns or paying taxes late.

Affected taxpayers in the federally-declared counties have the option of claiming disaster-related casualty losses on either their 2002 or 2003 federal income tax returns. Claiming the loss on an original or amended 2002 return will get the taxpayer an earlier refund, but waiting to claim the loss on the 2003 return could result in a greater tax saving, depending on other income factors.

Individuals may deduct personal property losses that are not covered by insurance or other reimbursements, but they must first subtract $100 for each casualty event and then subtract ten percent of their adjusted gross income from their total casualty losses for the year. For details on figuring a casualty loss deduction, see IRS Publication 547, Casualties, Disasters and Thefts.

Affected taxpayers claiming the disaster loss on a 2002 return should put the words “May Storms/Tornadoes” in red ink at the top of the form so that the IRS can expedite the processing of the refund. 

Storm victims may claim casualty losses on their 2003 federal tax return, if eligible, regardless of whether their county was declared a federal disaster area or not.

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

Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.

Taxpayers may order forms and publications by calling 1-800-TAX-FORM (1-800-829-3676).  The IRS toll-free number for general tax questions is 1-800-829-1040 (1-800-829-4059 for hearing impaired with TDD).

Limited tax preparation assistance is available at IRS Taxpayer Assistance Centers.  In Alabama, those are located in Birmingham, Dothan, Florence Huntsville, Mobile and Montgomery.   In Tennessee, they are located in Chattanooga, Jackson, Johnson City, Knoxville, Memphis, and Nashville. 

Assistance with casualty loss tax claims will also be available beginning May 19 at the FEMA Recovery Center at 1668 N. Parkway in Jackson, Tennessee.  IRS casualty loss forms and publications are available and IRS staff will be available part-time.  The site is open from 8 a.m. to 6 p.m. daily.

The IRS reminds taxpayers that federal disaster payments are generally not considered taxable income on federal tax returns.