By Sarah Brenner, JD
The news has been filled with reports of the flooding and damage in North Carolina in the wake of Hurricane Florence. As the cleanup continues, the IRS has announced tax relief for the storm’s victims. On September 15, the IRS postponed various tax filing and payment deadlines that occurred starting on Sept. 7, 2018. These deadlines will be extended until Jan. 31, 2019.
Currently, individuals who reside or have a business in Beaufort, Bladen, Brunswick, Carteret, Columbus, Craven, Cumberland, Duplin, Harnett, Lenoir, Jones, New Hanover, Onslow, Pamlico, Pender, Robeson, Sampson, and Wayne counties in North Carolina may qualify for tax relief. You can check the Hurricane Florence page of the IRS website for updates to this list here:https://www.irs.gov/newsroom/help-for-victims-of-hurricane-florence
Among the deadlines extended that affect retirement plans are the deadlines for taking a 2018 required minimum distribution (RMD) and recharacterizing a 2017 conversion. More details about this relief on the IRS website here: https://www.irs.gov/newsroom/irs-extends-upcoming-deadlines-provides-tax-relief-for-victims-of-hurricane-florence
While the IRS can grant some tax relief to victims of Hurricane Florence, its ability to do so is limited. For example, it cannot exempt early retirement account distributions from the 10% penalty for victims of Hurricane Florence. Such a change would require a change in the law and can only be made by Congress. North Carolina residents may get such legislation. Recently, Congress has passed legislation creating penalty-free qualified disaster distributions with extended time for rollovers for certain victims of Hurricanes Harvey, Irma, and Maria and the California wildfires. Similar legislation was passed in 2005 to help the victims of Hurricane Katrina.
Is legislation allowing disaster victims to tap their retirement accounts penalty-free always a sure thing? No, unfortunately politics can get in the way. Just ask victims of Hurricane Sandy in 2012. Similar proposed legislation for victims of the superstorm that struck the Northeast stalled in Congress and never became law. Hopefully, Hurricane Florence victims will fare better.