How the tax relief bill could impact your taxes

April 01-- Apr. 1--PANAMA CITY -- To file or not to file?

That's becoming the big question of the 2018 tax season in areas impacted by Hurricane Michael, as a tax relief bill has stuttered its way through Congress. It's coming, leaders say, but likely not in time for the April 15 filing deadline

So what does that mean for the disaster victims -- who unlike Congress -- are on a deadline?

Should they file now, with plans to amend later in this tax season which technically ends Oct. 15? Should they wait?

The answer, as with so many things, depends. The News Herald sat down with local CPA Ann Marie Sale, who has become a strong advocate for the tax bill, to better understand how Hurricane Michael can impact people's taxes.

What benefits are available right now?

If your home, business or personal belongings were damaged, there is potential you can file for a casualty loss. Insurance can impact this even if the money didn't come through until 2019. To get these benefits, disaster victims will have to report the casualty loss on the 2018 tax return or amend 2017 returns. You won't be able to report the casualty loss on 2019 tax returns.

Under current law, you won't have a personal casualty loss unless you itemize and any personal loss you do have will be reduced by 10 percent of your income.

If and when the tax bill passes, how does this change our personal casualty losses?

With the bill, disaster victims are eligible for much bigger deductions. Instead of itemizing, the losses can be added to your standard deduction. Plus, the 10 percent income limitation goes away.

Does the casualty loss piece affect me?

If you didn't have damaged personal belongings, home or business damage, this tax bill won't be offering you any casualty loss tax breaks just for being a disaster survivor. If you did have damage, then it probably will.

While it is in limbo, what do I do right now?

The good news is April 15 is not the hard deadline, individuals can file for an "extension of time" -- it's Form 4868 -- to ask the IRS for more time to file. You don't even have to explain why. The request is automatically approved and moves the deadline to file until Oct. 15, while all this is being sorted out in Congress. The one very important caveat is, it does not extend the time to pay, which is still April 15 if you owe. To find out if you owe, run an estimate and if you owe, put a check with this extension. If you overpay, you can get it back and the new disaster legislation will likely help your odds of getting back more. It does not cost anything to file for an extension.

There is another option. If filing right now is important, you can go forward with that limited casualty loss deduction and amend later this year.

Does the casualty loss impact 2019 returns?

No. Tax law says the losses have to be on the 2017 returns or 2018 returns, and the tax loss currently going through Congress won't change this. The casualty loss can't go on the 2019 returns, according to IRS publications, with rare exceptions. Disaster victims have until Oct. 15 to decide if they want to put the losses on 2017 or 2018.

Again, it doesn't go on 2019.

How does spending money out of your retirement account play into this?

Normally, if you pull from your retirement account early, you pay a 10 percent penalty. If the bill passes, you won't have to pay the penalty. Plus, if you repay it into your retirement account over the next five years it won't be taxable.

If you have taken money out of your account since Hurricane Michael or plan to take money out before the end of 2019, there's the option to show that income on your taxes over a three-year period.

Are there any other tax benefits for businesses?

In the tax bill, there's a provision called the "employee retention tax credit." Businesses who kept paying employees despite interruptions from the storm may qualify for a credit equal to 40 percent of wages paid to qualifying employees up to $6,000 per employee. The credit can be up to $2,400 cash per employee. The credit covers from the time of the storm until the end of 2018 or when significant operations were resumed.

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