Tax Deadlines Extended for Disaster Area Taxpayers in California, Alabama and Georgia

• March 13, 2023
• Carey M. Heyman, CPA

In late February, the Internal Revenue Service (IRS) announced that taxpayers in most of California (all but seven counties) and for parts of Alabama and Georgia would have until October 16, 2023 to file their individual and business tax returns and to make certain tax payments. The previous tax deadlines were already postponed to May 15, 2023 for taxpayers in the affected disaster areas. All three states have since conformed to the Federal guidance and extensions, with California being the last to do so in early March.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area, as designated by the Federal Emergency Management Agency (FEMA). There are four different eligible FEMA declarations, and the start dates and other details vary for each of these disasters. The current list of eligible localities and other details for each disaster are available here.

Revenue Procedure 2018-58 outlines the rules for disaster area taxpayers that are involved in Section 1031 exchanges. Typically to qualify for disaster relief, the relinquished property will need to have been transferred on or before the date of the “federally-declared” disaster. The taxpayer will also need to have difficulty meeting the 45-day identification period or 180-day exchange period deadline, which can be due to the following reasons:

• The relinquished property or replacement property is located in the “federally-declared” disaster area.
• The principal place of business of any party to the exchange transaction is located within the “federally-declared” disaster area. Examples could include the qualified intermediary, exchange accommodation titleholder, title insurance company, attorneys or lenders.
• A title insurance company is unable to provide the required insurance policy necessary to settle or close the transaction because of the “federally-declared” disaster.
• A financial institution is unwilling, either temporarily or permanently, to fund a real estate closing due to the “federally-declared” disaster.
• Any party to the transaction is killed, injured or is missing as a result of the “federally-declared” disaster.
• A document prepared in connection with the exchange or a relevant record is destroyed, damaged or lost as a result of the “federally-declared” disaster.

If the last day of a 45-day identification period or the last day of a 180-day exchange period fall on or after the date of a “federally-declared” disaster, relief is granted to the later of 120 days or to the last day of the general disaster extension period, as authorized in the IRS News Release or other similar guidance. This postponement also applies to the last day of the 45-day identification period if the identified relinquished property or identified replacement property is substantially damaged by the “federally-declared” disaster. The postponement cannot go beyond the due date (including extensions) of the taxpayer’s tax return for the year of the transfer or one year.

Source: Internal Revenue Service

Tags: California, Disaster, Franchise Tax Board, IRS, Real Estate, Relief, Section 1031 exchange, Federal and state taxation, including proposed regulations, Year-end tax planning | Comments Off on Tax Deadlines Extended for Disaster Area Taxpayers in California, Alabama and Georgia