IRS Tax Relief Helps Maine and Massachusetts Residents Weather the Storm

This third major hurricane of the 2023 season, Hurricane Lee originated as a tropical storm off the coast of West Africa on September 5, intensified into a hurricane as it traveled across the Atlantic over the next week, and eventually transitioned into an extratropical cyclone, making landfall in Canada on September 17. Along the way, it caused dangerous surf and rip currents and hurricane-force winds all along the entire Eastern coast of the United States, leaving floods, downed trees, and power outages in its path.

Both Massachusetts and Maine were particularly impacted, with 11% of electricity customers in Maine losing power on the 16th. Torrential rains and winds of up to 70 mph downed trees, closed roadways, and caused power outages affecting tens of thousands. The severity of the situation prompted Maine’s Governor Janet Mills and Massachusetts’s Governor Maura Healey to declare states of emergency, and President Biden issued emergency management declarations covering all counties in both states.

While it wasn’t as destructive as previous storms such as Hurricane Sandy (2012), Lee still caused plenty of damage to homes and businesses, the sum of which is still being calculated. As residents of Maine and Massachusetts repair the damage, the IRS has announced that various tax deadlines have been postponed to Feb. 15, 2024, for affected taxpayers in both states.

Who Is Eligible for Relief
The tax relief applies throughout all 16 counties in Maine and all 14 counties in Massachusetts. Individuals, households, and businesses in those counties who were impacted or harmed by the storm now have until Feb. 15, 2024, to file various federal individual and business tax returns and make tax payments originally due between September 15, 2023, and February 15, 2024.

Types of Filing and Payment Relief
The February 15, 2024, deadline will now apply to:

• Quarterly estimated income tax payments normally due on Sept. 15, 2023, and Jan. 16, 2024.
• Calendar-year partnerships and S corporations whose 2022 extensions run out on Sept. 15, 2023.
• Calendar-year corporations whose 2022 extensions run out on Oct. 16, 2023.
• Individuals who had a valid extension to file their 2022 return due to run out on Oct. 16, 2023. (This extension does not apply to payments, only to filings.)
• Quarterly payroll and excise tax returns normally due on Oct. 31, 2023, and Jan. 31, 2024.
• Calendar-year tax-exempt organizations whose extensions run out on Nov. 15, 2023.

Penalties for failing to make payroll and excise tax deposits due on or after Sept. 15, 2023, and before Oct. 2, 2023, will be abated as long as the deposits are made by Oct. 2, 2023.

Additional Forms of Tax Relief
In addition to being able to file late returns and payments, residents of Massachusetts and Maine should be aware of some other forms of tax relief available from the IRS:

Claiming Disaster-Related Losses
In addition to late filing and payments, individuals and businesses can choose to claim uninsured or unreimbursed disaster-related losses on their return either for the year the loss occurred (2023) or the return for the prior year (2022). Taxpayers making these claims should be sure to write the relevant FEMA declaration number on any return claiming a loss:

Maine: 3598-EM
Massachusetts: 3599-EM

Qualified disaster relief payments
Federal disaster relief payments are not considered taxable income. Provided that assistance is not also paid by insurance or reimbursement, these payments will not affect a taxpayer’s federal program payments or benefits, such as Social Security, Medicaid, and Supplemental Nutrition Assistance.

Disaster assistance includes payments from a government agency for reasonable and necessary personal, family, living, and funeral expenses, the repair or rehabilitation of a home, or for the repair or replacement of its contents. Qualifying payments can be made by both the federal government and by state and local governments in connection with a presidentially declared disaster.

Retirement Plan Distribution & Withdrawal Options
Affected taxpayers may be eligible to take a special disaster distribution from their retirement plans and individual retirement accounts (IRAs), which would be exempt from the standard 10% early distribution tax. Taxpayers may also be eligible to make hardship withdrawals to meet heavy and immediate financial needs caused by the storm; these withdrawals would not be subject to penalties but would still be subject to standard income tax.

The rules governing withdrawals and distributions vary by retirement fund type.

Tonneson + Co Can Help
If you are a taxpayer in Massachusetts or Maine who has been affected by Hurricane Lee, please contact Tonneson today. Our qualified CPAs can help ensure that you are aware of all your rights and obligations and that your paperwork is filed appropriately.

Contact us at Tonneson + Co today to learn how we can help.