PHX-2002-064, July 19, 2002   

PHOENIX -- The Internal Revenue Service today announced special tax relief for Arizona residents affected by the fires that began June 18, 2002.   

For the purposes of this tax relief, affected taxpayers include individuals and businesses located in Apache and Navajo Counties and the Fort Apache Reservation, plus those whose tax records are located there. Relief workers, firefighters and taxpayers outside these areas who are significantly impacted by the fires also qualify for this relief. 

Taxpayers should put the words “Arizona Fire” in red ink at the top of any tax forms or notices when using any of these relief provisions.

Affected taxpayers have the option of claiming disaster-related casualty losses on either their 2001 or 2002 federal income tax returns. Amending a 2001 return will get the taxpayer an earlier refund, but waiting until filing the 2002 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.”

The IRS has also granted the following relief:

• Affected taxpayers with tax returns originally due between June 18 and October 15, 2002, will have until October 15, 2002, to file without penalty. They may obtain additional time to file, not to exceed six months from the original due date, by filing an extension request by October 15, 2002. 
• Affected taxpayers who requested an extension of time to file their 2001 individual income tax return to August 15, 2002, will have until October 15, 2002, to file without making an additional request. The IRS is not granting any additional time to file to fiscal year corporations that already have a six-month extension of time to file which ends after June 18, 2002.
• Affected taxpayers will not owe interest or failure to pay penalties for overdue amounts from June 18, 2002, to October 15, 2002.

Although the IRS does not grant additional time to make deposits of employment and excise taxes, it will consider requests for abatement of the failure to deposit penalty, based on reasonable cause, for deposits due between June 18, 2002, and October 15, 2002, on a case-by-case basis.

The IRS is not extending the time for filing information returns or Form 5500 series returns (related to certain pension plans).

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 “Arizona Fire” 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 that the disaster impacts them so that the IRS can provide appropriate consideration to their case.

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