July 27, 1993
IRS Helps Charities Aid Flood Victims
WASHINGTON - The Internal Revenue Service is assisting in
Midwest flood relief efforts and is making it easier for charities
to aid victims. It will grant tax-exempt status more quickly for
organizations formed to help flood victims and has relaxed the usual
restrictions on such agencies aiding their own employees.
New flood relief organizations will get expedited service by
putting the words "FLOOD DISASTER" at the top of their Form 1023,
"Application for Recognition of Tax Exemption." The free IRS
Publication 557, "Tax Exempt Status for Your Organization," has
additional information. The application form and the publication
may be ordered by calling 1-800-TAX-FORM.
IRS assistors are working at Federal Emergency Management
Agency (FEMA) sites, helping flood victims get tax information to
claim casualty losses and file for loans. Local IRS offices in the
Midwest have announced that taxpayers who are unable to file returns
or make payments on their federal tax obligations because of the
flood disaster will not be penalized. In addition, the IRS has
curtailed normal collection and examination actions for affected
taxpayers in the flooded areas.
As it did last year after Hurricanes Andrew and Iniki, the IRS
is allowing tax-exempt organizations to make appropriate, good-faith
relief efforts for any victims of the Midwest floods, even if the
aid recipients are their employees or employees of related
organizations. Normally, charities are subject to legal
restrictions in their dealings with employees, and violations of
these restrictions could result in tax consequences.
For example, in accordance with this relief, a company-funded
foundation that is an exempt organization providing relief to flood
victims may also extend relief to its own employees who are victims
of the flood. However, the foundation cannot limit its help to the
company's executives, nor give aid to all employees in the area
whether or not they suffered actual flood damage. This would not be
considered a good-faith relief effort, and the IRS could assess
penalties against the foundation. Notice 93-41, to be published in
Internal Revenue Bulletin 1993-27, dated Aug. 16, 1993, has specific
guidance on the relief provisions for charities.
In the past, the IRS has helped taxpayers who suffered disaster
losses request copies of their prior year returns, which could take
several weeks to be received. Now the IRS has much of this data
on-line at its local offices and is faxing computer printouts of
taxpayer account data to its representatives at FEMA sites. This
means that flood victims can more quickly get income verification to
apply for Small Business Administration loans or to prepare amended
tax returns to claim their casualty losses, resulting in faster
refunds. Federal disaster area victims have the option of claiming
losses on the previous year's tax return or waiting until they file
the current year's return.
Three IRS publications explain the tax implications of
different disaster situations: Publication 225, "Farmer's Tax
Guide," Publication 334, "Tax Guide for Small Business," and
Publication 547, "Nonbusiness Disasters, Casualties and Thefts."
All are available by calling 1-800-TAX-FORM.
Taxpayers in flooded areas of Illinois, Iowa, Minnesota,
Missouri, Nebraska, South Dakota and Wisconsin have until October 15
to file certain federal tax returns or pay federal taxes that would
have been due on or after June 30 and before October 15, 1993.
However, corporations with extensions for income tax returns
originally due March 15 must file these returns by September 15, the
maximum extension the law allows.
The law does not permit the waiver of interest, which must be
charged from the original due date until the taxes are paid.
Likewise, the due dates for depositing withheld income, social
security or excise taxes and for filing employment tax returns
cannot be extended. However, the IRS will abate the late deposit
penalty for taxes deposited by September 15 and will abate the late
filing penalty for returns filed by October 15, 1993.
Affected taxpayers should put the words "FLOOD DISASTER, COUNTY
OF __________" in red at the top of any return relying on
flood-related relief. The IRS will issue a more detailed technical
description of this relief shortly.
The IRS will not start any new examinations of flood-affected
taxpayers and those currently being examined will have extra time to
respond to any requests for information. Those who receive notices
that may already be in the mail should contact the IRS to obtain
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