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Casualty and Theft Losses in general

Summary:

Taxpayers may deduct casualty and theft losses on your federal income tax return. 

Generally, this include losses relating to your home, household items, and vehicles.

However, reimbursement you get from your insurance company are deducted form your loss. 

Losses can be deduct in the year of the loss or in the receding year (i.e., for federally declared Disaster Zones by the President of the U.S.A.)

What is considered a Casualty Loss?

A casualty loss can result from the damage, destruction, or loss of your property from any sudden, unexpected, or unusual event such as a flood, hurricane, tornado, fire, earthquake, or volcanic eruption. A casualty doesn't include normal wear and tear or progressive deterioration.

What happens if the property is not completely destroyed?

For personal-use property- the amount of your casualty loss is the lesser of:

• The adjusted basis of your property, or
• The decrease in fair market value of your property as a result of the casualty

For business or income-producing property (e.g., rental property), and the property is completely destroyed, then the amount of your loss is your adjusted basis. The adjusted basis of your property is usually your cost, increased or decreased by certain events such as improvements or depreciation

What happens if I get a reimbursement(s)?

You must reduce the loss by any salvage value and by any insurance or other reimbursement you receive or expect to receive. 

You may determine the decrease in fair market value by appraisal, or if certain conditions are met, by the cost of repairing the property. 

Where did you go about claiming your losses?

Individuals are required to claim their casualty and theft losses as an itemized deduction on Form 1040, Schedule A (PDF), Itemized Deductions, (or Schedule A in Form 1040NR (PDF), if you're a nonresident alien).

Report casualty and theft losses on Form 4684 (PDF), Use Section A for personal-use property and Section B for business or income-producing property. 

What year you be deducting your losses?

Casualty losses are generally deductible in the year the casualty occurred. However, if you have a casualty loss from a federally declared disaster that occurred in an area warranting public or individual assistance (or both), you can choose to treat the casualty loss as having occurred in the year immediately preceding the tax year in which the disaster happened, and you can deduct the loss on your return or amended return for that preceding tax year. 

What happens when my loss is greater than my income? 

In that case, you may have a net operating loss (NOL). 

Suggest hire an CPA because the terminology and details can get complicated.

General Information Required to declare to the IRS (See IRS Form 4684)- not all inclusive.

1- description of the property

2- date acquired

3-type of property

4-property damaged/partially damaged

5-location of the property

6-cost or basis

7-insurance reimbursement(s)

8-FMV before and after the loss

9-income producing property or personal use

10-Other information

SOURCE: IRS.GOV

Additional Tax Relief IDEAS

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Actions that employers can take to aid hurricane victims:

• Employers can make cash payments to charities providing relief on employee accumulated and earned vacation, sick or personal leave.  Payments can be made before Jan. 1, 2019. Tax treatment: Donated leave is not included in the employee’s income, and employers may deduct these cash payments to charity as a business expense.
• 401(k)s and similar employer-sponsored retirement plans can make loans and hardship distributions to hurricane victims and members of their families. A retirement plan can allow a hurricane victim to take a hardship distribution or borrow up to the specified statutory limits from the victim’s retirement plan. It also means that a person who lives outside the disaster area can take out a retirement plan loan or hardship distribution and use it to assist a son, daughter, parent, grandparent or dependent who lived or worked in the disaster area. Hardship withdrawals must be made by Jan. 31, 2018.
• The IRS is waiving late-deposit penalties for federal payroll and excise tax deposits normally due during the first 15 days of the disaster period. Check out the disaster relief page for the time periods that apply to each jurisdiction.
• Individuals and businesses who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2017 return normally filed next year), or the return for the prior year (2016). See Publication 547 for details.
• The IRS is waiving the usual fees and expediting requests for copies of previously filed tax returns for disaster area taxpayers. This relief can be especially helpful to anyone whose copies of these documents were lost or destroyed by the hurricane.
• If disaster-area taxpayers are contacted by the IRS on a collection or examination matter, they should be sure to explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.

Updates:

US congress had not approved these provisions as of today, Sept. 27, 2017

Source: IRS.gov

HCAD INFORMATION

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Hurricane Harvey Damage Report Feature Now On Harris County Appraisal District App 

HCAD phone application to upload

Harris County homeowners who have any type of property damage from Hurricane Harvey can now report that damage to the Harris County Appraisal District through the district’s upgraded app. The upgraded app allows residential property owners to report flood, tornado or roof damage electronically.   

“The appraisal district can use this information to identify the most damaged neighborhoods and properties to help the homeowner next year when the property is reappraised January 1 by possibly reducing the value because of existing damage or ongoing repair work,” said Roland Altinger, chief appraiser.   The upgraded app gives the homeowner options to quickly identify whether the damage was on the home or garage and provides an event damage report that lists options for the amount of water, an estimate of damage caused by a tornado or roof leaks and a section for fire damage. 

HOW YOU SIGN ON THE APP

When the homeowner is ready to submit the report, they take a photo of the front and back of their driver’s license to verify the property owner’s identity.  The app will prompt the user to allow access to the camera.  “We started to develop this app last week when we heard of the approaching hurricane,” Altinger said. “This is a revolutionary advance in property assessment, and we are the only appraisal district in the world that has it available for our property owners.” 

PHONE Operating Systems Available

The appraisal district already had an existing app for iPhones and Androids that provided information to property owners and allowed them to submit exemption applications and request their iFile number, which is needed to file a protest.  

Searching for the address or phone numbers automatically triggers elements on the phone, which would then load maps for directions or prompt the phone to dial a number.   “This upgrade is another example of how we are continuing to make it easier and more convenient for property owners to work with the appraisal district.” Altinger said. The new HCAD app is available to download for free through the Google Play Store or the Apple App Store, but it requires an iPhone 4 or an iPad 3 or beyond. 

If you already have the app, you can update it to reveal the new damage report feature. The appraisal district also has set up a special phone line for property owners to report Hurricane Harvey damage at 713.821.5805, or they can email that information to help@hcad.org .  Please provide your name, address, phone number and account number, if you have it, along with the number of inches or feet of water you received. 

About HCAD

The Harris County Appraisal District is a political subdivision of the State of Texas established in 1980 for the purpose of discovering and appraising property for ad valorem tax purposes for each taxing unit within the boundaries of the district.  The district has more than 1.8 million parcels of property to assess each year with a total market value of approximately $575 billion.  The appraisal district in Harris County is the largest in Texas, serving approximately 500 taxing units, and one of the largest appraisal districts in the United States.  For further information, visit www.hcad.org. 

Source HCAD

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Individuals who reside or have a business in

Aransas, Bee, Brazoria, Calhoun, Chambers, Fort Bend, Galveston, Goliad, Harris, Jackson, Kleberg, Liberty, Matagorda, Nueces, Refugio, San Patricio, Victoria, and Wharton Counties may qualify for tax relief. DUE DATES EXTENDED

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Aug. 23, 2017 and before Jan. 31, 2018, are granted additional time to file through Jan. 31, 2018. This includes taxpayers who had a valid extension to file their 2016 return that was due to run out on Oct. 16, 2017. It also includes the quarterly estimated income tax payments originally due on Sept. 15, 2017 and Jan. 16, 2018, and the quarterly payroll and excise tax returns normally due on Oct. 31, 2017. In addition, penalties on payroll and excise tax deposits due on or after Aug. 23, 2017, and before Sept. 7, 2017, will be abated as long as the deposits were made by Sept. 7, 2017. CASUALTY LOSSES Affected taxpayers in a federally declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either the year in which the event occurred, or the prior year. Individuals may deduct personal property losses that are not covered by insurance or other reimbursements.

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Teens Taxpayers-Jobs this Summer

Did you son or daughter got a summer job?  These are some of the things you should look at: 

1. Are you expect to receive a W-2 or a 1099-MISC?
1. You need to know because the taxpayer are required to pay federal taxes regularly or in installment. 
2. 
   
2. Did you file Form W-4? 
1. This form is used to calculate how much federal income tax to withhold from the employee’s pay. 
3. What kind of job are you engaging in?
1. Contract work or independent contractor.
1. Do you know what the IRS considers a Self-Employee?
2. Do you what records to keep?
3. Do you know what can be deductible in your industry?
2. Are you going to get tips?
1. Records to keep?
3. Are you going to be a newspaper carrier or a distributor?
1. Are you self employee?
4. Are you participating in an ROTC or SUMMER Camp where you get pay?
5. Are you under age 18?                                                                                                                   

We CAN HELP you answer all these questions.

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Accepted by	Direct Deposit	Paper Check
Jan 30 – Feb 5, 2017	Feb 17, 2017	Feb 22, 2017
Feb 6 – 14, 2017	Feb 24, 2017	Mar 1, 2017
Feb 13 – 19, 2017	Mar 3, 2017	Mar 8, 2017
Feb 20  – 26, 2017	Mar 10, 2017	Mar 15, 2017
Feb 27 – Mar 5, 2017	Mar 17, 2017	Mar 22, 2017
Mar 6 – 12, 2017	Mar 24, 2017	Mar 29, 2017
Mar 13 – 19, 2017	Mar 31, 2017	Apr 5, 2017
Mar 20 – 26, 2017	Apr 7, 2017	Apr 12, 2017
Mar 27 – Apr 2, 2017	Apr 14, 2017	Apr 19, 2017
Apr 3 – Apr 9, 2017	Apr 21, 2017	Apr 26, 2017
Apr 10 – Apr 16, 2017	Apr 28, 2017	May 3, 2017
Apr 17 – Apr 23, 2017	May 5, 2017	May 10, 2017
Apr 24 – Apr 30, 2017	May 12, 2017	May 17, 2017

Did you missed the W-2 filing due date?

Jan 31, 2017 was the due date for filing forms W-2s.

The IRS ruling.

The Protecting Americans from Tax Hikes (PATH) Act, enacted last December, now required to file their copies of Form W-2, submitted to the Social Security Administration, by Jan. 31.  The same due date applies for the form 1099-MISC (reporting non-employee compensation) to independent contractors.

Extensions?

Only one 30-day extension to file Form W-2 is available and this extension is not automatic. If an extension is necessary, a Form 8809 Application for Extension of Time to File Information Returns must be completed by no later than January 31.

Reasons:

The new accelerated deadline will help the IRS improve its efforts to spot errors on returns filed by taxpayers. Having these W-2s and 1099s earlier will make it easier for the IRS to verify the legitimacy of tax returns and properly issue refunds to taxpayers eligible to receive them. In many instances, this will enable the IRS to release tax refunds more quickly than in the past.

2016 Filing Season Begins on Jan 19, 2016

By Modesto Matheu, CPA

modesto.matheu@gmail.com

832-498-1012

The Internal Revenue Service announced today that the nation’s tax season will begin as scheduled on Tuesday, Jan. 19, 2016.  However, some tax preparation software packages are ready to process tax returns earlier than the 19th in preparation for the IRS schedule date.  So, there is no advantage for people filing earlier other than being among the first in line when the IRS processing begin.

The 2015 filing due date may differ depending on your state of residence state.

The filing deadline to submit your 2015 tax returns is Monday, April 18, 2016, rather than the traditional April 15 date.  (Washington, D.C., will celebrate Emancipation Day on that Friday, which pushes the deadline to the following Monday for most of the nation.)

Residents of Maine and Massachusetts deadline is Tuesday, April 19. (Due to Patriots Day Holiday on Monday, April 18.) 

On recordkepping

All taxpayers should make sure they have all their year-end statements, such as: Forms W-2 from employers, Forms 1099 from banks and other payers, and Form 1095-A from the Marketplace for those claiming the premium tax credit. Including all other schedules, logs, and other tax documents.

What is the recommended filing option?

Choosing to e-file and direct deposit (e.g., refund) remains the fastest and safest way to file an accurate income tax return and receive a refund.  

When do I get my refund?

The IRS anticipates issuing more than nine out of ten refunds in less than 21 days. Every case is different and some made take longer than others.

For help contact your tax professional or the IRS (IRS.gov). 

Source: IR-2015-139, Dec. 21, 2015

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2016 Standard Mileage Rates 

The 2016 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes, are:

• 54 cents per mile for business miles driven
• 19 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the MACRS or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

They are other requirements (e.g., travel log) for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical or charitable expense.  

Source IRS.gov 

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Beware of Fake Charitable Organizations

Many charitable schemes peak during filing season as people prepare their returns or hire someone to prepare their taxes. Most scammer operating bogus charities may contact people by telephone or email to solicit money or financial information. 

Before you donate to a charity, at a minimum, please ask yourself the following: 

• Do the Charitable Organization name sounds similar to a widely know legitimate organization? Some phony charities use names or websites that sound or look like those of respected, legitimate organizations. 
• Suggestion: Verify the legitimace of the organization by: calling directly the organization main office(s) and ask to speak with an administrator, and/or check the IRS website for a list of legitimate tax exempt organizations register with the IRS.   
• Do the organization is asking for your personal financial information, such as Social Security number?  Scam artists may use this information to steal your identity and money. 
• Suggestion: I cannot think of a reason for asking a taxpayer for a social security number-that is a red flag.
• Are they telling you that they only take credit cards?  People use credit card numbers to make legitimate donations but please be very careful when you are speaking with someone who called you.
• Suggestion: One option is to request to send you a payment slip in the mail.  That will give you time to reflect and investigate who is the organization.
• Are you sending Cash in the contribution envelope? 
• Suggestion: Please, do not send currency. For security and tax record purposes, contribution made by check or credit card provides documentation of the disbursement.  (Of course, you may want to exclude your typical church offerings.)

How can the IRS help?

Visit the IRS.gov website an search for "Exempt Organizations Select Check", and find most qualified charities to which donations may be tax-deductible. Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice to shut down scams and prosecute the criminals behind them.  To help disaster victims, the IRS encourages taxpayers to donate to recognized charities.

Donations following after a major Disaster: 

Another long-standing type of abuse or fraud involves scams that occur in the wake of significant natural disasters.  They may even directly contact disaster victims and claim to be working for or on behalf of the IRS to help the victims file casualty loss claims and get tax refunds.

Source: IRS.gov