Small business owners affected by the recent Hawaii wildfires received good news from the Internal Revenue Service (IRS). The agency announced that taxpayers in Maui and Hawaii counties affected by the wildfires will receive extended deadlines for various federal individual and business tax returns and tax payments until Feb. 15, 2024.
The IRS’s decision to extend tax relief aims to aid victims in areas designated by the Federal Emergency Management Agency (FEMA) for disaster relief. This initiative ensures that individuals and businesses residing or operating in the affected counties get tax relief. Up-to-date listings of eligible localities can always be found on the disaster relief page on the IRS website.
What does this mean for Small Business Owners?
- Extended Deadlines: The tax relief means any tax filings or payments due from Aug. 8, 2023, to Feb. 15, 2024, are postponed. This gives affected taxpayers more time to gather resources and manage their finances.
- Specifics of the Relief: Deadlines affected by this extension include:
- The valid extension for individuals to file their 2022 returns, initially expiring on Oct. 16, 2023.
- Quarterly estimated income tax payments due on Sept. 15, 2023, and Jan. 16, 2024.
- Quarterly payroll and excise tax returns scheduled for Oct. 31, 2023, and Jan. 31, 2024.
- Extensions for calendar-year partnerships, S corporations, corporations, and tax-exempt organizations ending between Sept. 15 and Nov. 15, 2023.
- Penalty Relief: For those who failed to make payroll and excise tax deposits from August 8 to before September 7, 2023, penalties will be waived, provided these deposits are completed by Sept. 7, 2023.
- Automatic Filing and Penalty Relief: If your business’s registered IRS address is in the disaster area, the relief is automatically granted. Those receiving late payment or filing notices due to unique circumstances, such as relocating after filing their return, should contact the IRS to have penalties abated.
- For Workers Outside the Affected Area: If you’re a business owner or worker whose records, necessary for meeting a deadline during the postponement period, are in the disaster-stricken region, but you reside outside, you can qualify for relief. This also applies to those involved in relief operations linked to recognized governmental or philanthropic organizations.
- Additional Tax Relief Options: Businesses that have experienced uninsured or unreimbursed disaster-related losses have the option to claim these losses on their 2023 return (usually filed next year) or on the prior year’s (2022) return. Those claiming a loss should indicate the FEMA declaration number – DR-4724-HI – on their returns.
- Exclusion from Gross Income: Funds received from a government agency to cover reasonable personal, family, living, funeral, home repair, or rehabilitation expenses or to replace home contents can be excluded from gross income.
- Retirement Plans and IRA Benefits: Taxpayers in affected areas with retirement plans or IRAs might be eligible for additional relief, like special disaster distributions without the 10% early distribution tax or hardship withdrawals. Each plan or IRA has specific rules, so individuals should consult their plan administrators.
The IRS emphasized that this tax relief is part of a larger federal effort to assist those affected by the Hawaii wildfires, basing decisions on local damage assessments by FEMA. For further details on disaster recovery, small business owners can visit DisasterAssistance.gov.
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