The destruction caused by the fires has prompted the federal government to list Napa County, among others, as a federal disaster area.
Being declared a disaster area is more than political posturing. Several benefits spring from this.
The most significant tax benefit offered to those who suffered damages from the fires is the ability to amend the previous year return and deduct losses from 2017 on the 2016 return.
This benefit is not available to people with regular losses. The ZIP code of the filer needs to be inside a declared disaster area.
The federal government knows that people who suffer losses in any given year will not file taxes until the next year.
If those individuals extend, it may delay the tax benefits of the losses well over a year. To correct this, the IRS will allow people take the loss on the previous year. This benefit enables the receipt of a much-needed refund more quickly.
If you qualify to take a loss and you desire to amend the 2016 tax forms, write “California Wildfire” on top of the return. That will cause the IRS to expedite the processing of the refund.
The benefit that will likely affect most people is an extension of tax deadlines.
People who had extended the filing of their taxes until the Oct. 16, 2017, deadline will receive a reprieve. The new deadline will be Jan. 31, 2018.
Another reprieve will be given to those who had to file quarterly estimated by the Jan. 16, 2018, deadline. Those who need to pay quarterly estimated will have until Jan. 31, 2018.
There are many others tax deadlines that fall between Oct. 8, 2017, and Jan. 31, 2018, which are extended. If you have any questions, ask your tax professional.
There is no need to have suffered a loss to qualify for the deadline extensions. These extensions are automatic to those who reside within the correct ZIP codes.
I’m confident most Napa Valley Register readers reside in Napa County, but other counties have received the same benefits. Butte, Lake, Mendocino, Nevada, Sonoma, and Yuba counties have all received the disaster designation.
People who file with qualified disaster area ZIP codes will receive these benefits automatically.
If you have been affected by the wildfires, but live or have a business outside of an approved ZIP codes, the IRS has asked that you call their disaster relief hotline at 866-562-5227.
Napa alone has lost around 600 structures, but the losses don’t end there.
Cars, household items, boats and other items will also qualify for loss deductions.
If you know a person who has suffered a loss, share this information with them. Most people I have spoken with are unaware they can deduct losses on previous years’ returns.
As with all tax issues, discuss potential loss benefits with a qualified tax professional.