In 2025, several significant natural disasters have impacted various regions across the United States. In response, the IRS has announced tax relief measures to support affected individuals and businesses. This article outlines the disasters and the corresponding tax relief provisions.
California Wildfires and Straight-Line Winds
Incident Period: January 7, 2025 – January 31, 2025
Affected Area: Los Angeles County, California
IRS Relief Measures:
Extended Tax Relief for Southern California Wildfire Victims: Affected taxpayers have until October 15, 2025, to file federal individual and business tax returns and make tax payments. This extension applies to deadlines falling between January 7, 2025, and October 15, 2025 for those impacted by.
Penalties Abatement: Penalties for payroll and excise tax deposits due between January 7 and January 22, 2025, are abated if the deposits were made by January 22, 2025.
Kentucky Severe Storms, Flooding, and Landslides
Incident Period: February 14, 2025, and continuing
Affected Area: Entire state of Kentucky
IRS Relief Measures:
Extended Deadlines: Affected taxpayers have until November 3, 2025, to file federal individual and business tax returns and make tax payments. This extension applies to deadlines falling between February 14, 2025, and November 3, 2025.
Penalties Abatement: Penalties for payroll and excise tax deposits due between February 14 and March 1, 2025, are abated if the deposits were made by March 1, 2025.
Hurricane Helene
Incident Period: September 1, 2024, and continuing
Affected Areas: Parts of Alabama, Florida, Georgia, Louisiana, Mississippi, North Carolina, and Tennessee
IRS Relief Measures:
Extended Deadlines: Affected taxpayers have until May 1, 2025, to file federal individual and business tax returns and make tax payments. This extension applies to deadlines falling between September 1, 2024, and May 1, 2025.
Penalties Abatement: Penalties for payroll and excise tax deposits due between September 1 and September 15, 2024, are abated if the deposits were made by September 15, 2024.
General Guidance for Affected Taxpayers
Automatic Application of Relief: The IRS automatically applies filing and payment relief to taxpayers with an IRS address of record in the disaster area. Those who moved to the area after filing their last return or whose records are located in the affected area should contact the IRS at 866-562-5227.
Claiming Disaster-Related Losses: Uninsured or unreimbursed disaster-related losses can be claimed on either the tax return for the year the loss occurred or the prior year. To claim these losses, file Form 4684, Casualties and Thefts, and attach it to your individual tax return (Form 1040). If claiming the loss for a prior year, file an amended return using Form 1040-X and include Form 4684. Remember to write the appropriate FEMA disaster declaration number on the forms (e.g., 4856-DR for the California wildfires).
Staying informed about disaster relief options is crucial for effective recovery. Tax professionals and preparers should monitor updates to assist clients in navigating these relief measures.
IRS Disaster Relief Page: For a comprehensive list of disaster declarations and related tax relief, visit the IRS Tax Relief in Disaster Situations page.
Note: The information provided is based on IRS announcements as of March 10, 2025. Affected taxpayers should consult the IRS or a tax professional for the most current guidance.
IRS Extends Tax Relief for Southern California Wildfire Victims
The IRS has announced significant tax relief measures for individuals and businesses affected by wildfires and straight-line winds in southern California. These relief measures extend federal tax filing and payment deadlines and provide additional tax benefits to help those impacted recover financially.
Who qualifies for relief?
The relief applies to any area designated by FEMA as part of the federal disaster area. Currently, this includes individuals and businesses in Los Angeles County. More counties may be added as FEMA updates its assessments. Taxpayers can verify eligible areas on the IRS Disaster Relief page.
What are the extended deadlines for filing and payments
Taxpayers in affected areas now have until October 15, 2025, to file federal tax returns and make payments for various deadlines that fall between January 7, 2025, and October 15, 2025. Key deadlines extended include:
Individual income tax returns and payments (originally due April 15, 2025)
2024 IRA and HSA contributions
Quarterly estimated tax payments due January 15, April 15, June 16, and September 15, 2025
Quarterly payroll and excise tax returns due January 31, April 30, and July 31, 2025
Partnership and S corporation returns (originally due March 17, 2025)
Corporation and fiduciary returns (originally due April 15, 2025)
Tax-exempt organization returns (originally due May 15, 2025)
Penalties for payroll and excise tax deposits due between January 7 and January 22, 2025, will be abated if the deposits are made by January 22, 2025.
How do my clients access disaster relief?
The IRS automatically applies relief to taxpayers with an IRS address of record in the disaster area. However, those who moved to the area after filing their return or whose necessary records are located in the disaster zone should contact the IRS at 866-562-5227.
Which forms do I need to file for my clients?
The forms required depend on the type of relief your client is claiming:
For uninsured or unreimbursed disaster-related losses, file Form 4684, Casualties and Thefts, to calculate and report the casualty loss. Attach this form to your client’s individual tax return, typically Form 1040.
If your client wants to claim the loss in the prior tax year, they will need to file an amended return using Form 1040-X and include Form 4684.
Be sure to write the FEMA disaster declaration number on the forms (e.g., 4856-DR for the southern California wildfires).
What is the difference between a casualty loss and a casualty gain?
A casualty loss occurs when the cost of repairing or replacing damaged property exceeds the insurance reimbursement or other compensation received. This results in a deductible loss, subject to certain IRS limits.
On the other hand, a casualty gain happens when the insurance reimbursement or compensation received exceeds the property’s cost basis (original purchase price or adjusted value). In this case, the gain may be taxable unless it is deferred under special rules, such as reinvesting in similar property within a specific time frame.
For further clarification or assistance with filing disaster-related taxes, consult IRSPublication 547.
Are there any additional relief options?
The IRS offers additional relief for affected taxpayers, including:
Disaster-related loss deductions: Uninsured or unreimbursed disaster-related losses can be claimed on either the 2024 or 2025 tax return. Be sure to include FEMA declaration number 4856-DR when filing.
Exclusion of disaster relief payments from gross income: Payments for necessary personal, family, or property expenses may be excluded from taxable income. Refer to Publication 525 for details.
Retirement plan relief: Affected taxpayers may qualify for penalty-free disaster distributions or hardship withdrawals from IRAs or other retirement accounts.
Does insurance claim money count as taxable income?
Generally, insurance claim money received for disaster-related losses is not taxable if it is used to restore or replace damaged property. However, if the reimbursement exceeds the original cost of the property, the excess may result in a casualty gain, which could be taxable. Clients should keep detailed records of both the insurance claims and their expenses for repairs or replacements to ensure proper reporting.
Supporting Disaster Recovery
Tax professionals and preparers should stay updated on disaster relief options to support clients effectively. Visit the IRS website for ongoing updates about eligible areas and new measures.
Subscribe to the Drake Tax Taxing Subjects blog for more news and updates like this overview of IRS tax relief options for southern California wildfire victims.
The IRS relief measures are part of a coordinated federal response to assist disaster-affected communities. For additional resources and assistance, visit DisasterAssistance.gov.
The IRS will begin accepting individual returns on Monday, Jan. 27, 2025
More and more taxpayers are leaning towards the convenience and speed of electronic filing (e-file) leading to many of us wanting to know exactly when e-filing starts. The IRS will begin accepting individual returns on Monday, January 27, 2025. Direct File will be available to a limited number of states on January 27th.
When Does E-Filing Start for the IRS?
The exact date can vary slightly every year due to various tax updates and new laws. This year, individual returns will be accepted on Monday, January 27, 2025. For business, e-file opened on January 15th at 6:00 am. Direct Filewill be available to eligible taxpayers in 25 states to file their taxes directly with the IRS which includes 12 states that were part of the IRS pilot last year. Please visit the IRS website to find out more about specific states that are eligible.
Early Preparations: What Can You Do Before E-Filing Opens?
There are several things you can do to prepare for tax season before e-file officially opens:
Gather Your Client’s Tax Documents: Collect all the necessary paperwork you’ll need to help your clients file including:
Receipts for deductions (e.g., medical, educational, charitable donations)
Check for Tax Law Changes: It’s a good idea to review any tax law updates especially since a new administration has been elected—which could impact your filing. The IRS often releases updates regarding new credits, deductions, or changes to filing requirements. Staying informed can help you avoid surprises. We will update our systems and do our best to keep you informed via Taxing Subjects, the Drake Software blog.
Try to stay ahead: Begin preparing your clients’ returns before the e-filing system opens so you are ready to hit the submit button once the IRS officially opens its filing system.
Can you e-file prior year returns?
You can usually e-file the current tax year and the two prior years, except during IRS closing periods. When tax yar 2024 e-filing opens, you can file for 2024, 2023, and 2022. However, if an extension is needed, it can generally only apply to the current tax year.
While waiting for e-filing to open, take the time to gather all the necessary documents, review potential changes in tax laws, and get familiar with your tax preparation software or professional service. By getting an early start, you’ll be ready to file as soon as the IRS begins accepting returns.
Understanding the timeline for e-filing helps you meet your tax filing obligations without stress and can help take advantage of the many benefits that come with submitting your return electronically. So, get ready and prepare to file!
Stay updated. Subscribe to Taxing Subjects and get the latest updates on e-filing and other important tax updates.
The IRS has announced a one-day extension for taxpayers with federal tax deadlines originally set for Thursday, January 9, 2025. The new deadline is Friday, January 10, 2025.
This extension comes in response to a Presidential Proclamation issued on December 29, 2024, declaring January 9 as a National Day of Mourning to honor James Earl Carter, Jr., the 39th President of the United States.
Here’s what the extension covers:
Tax Returns: Any federal tax return that would have been due on January 9, 2025.
Tax Payments: Federal tax payments, including income, payroll, or excise taxes, originally required by that date.
Tax Deposits: Federal tax deposits, including those processed through the Electronic Federal Tax Payment System (EFTPS).
The extension provides taxpayers an extra day to ensure compliance with their federal tax obligations without facing penalties.
If you have returns or payments due on January 9, take advantage of this extended deadline to file or pay by January 10, 2025.
If you underpaid taxes in 2024, consider making a fourth-quarter estimated tax payment by Jan. 15, 2025, to avoid penalties.
The U.S. tax system requires payments throughout the year via paycheck withholdings or quarterly estimated payments. Missing a quarterly payment may lead to penalties when filing your 2025 return.
Who Needs to Pay?
Self-employed individuals or independent contractors.
Those who owed taxes last year and may owe again.
Households with two earners or additional income sources like dividends.
Taxpayers with complex financial situations or inadequate withholding.
What Income is Taxed? Taxable income includes side jobs, gig work, unemployment benefits, digital assets (e.g., cryptocurrency), year-end bonuses, stock dividends, and capital gains.
How to Pay Payments can be made through the IRS Online Account, Direct Pay, EFTPS, or by check to “United States Treasury.”
Making a payment now may reduce or eliminate penalties. Use tools like the IRS The Tax Withholding Estimator or Form 1040-ES to calculate your estimated payment.
Plan ahead and take steps to avoid surprises during the upcoming tax season.
The IRS annually adjusts over 60 tax provisions for inflation to prevent “bracket creep,” where inflation, not income growth, pushes taxpayers into higher brackets or reduces deductions. Since 2018, the IRS has used the Chained Consumer Price Index (C-CPI) for more accurate adjustments. For tax year 2025, filed in 2026, tax parameters will rise by an average of 2.8%, ensuring fairness amid inflation.
Revenue Procedure 2024-40 PDF provides detailed information on adjustments and changes to more than 60 tax provisions that will impact taxpayers when they file their returns in 2026.
Federal Tax Rates and Brackets for 2025
The tax rates remain unchanged, but income thresholds have been adjusted for inflation to prevent “bracket creep.” Here’s how they break down for different filing statuses:
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