IRS Provides Tax Relief for Those Impacted by Hurricane Helene

The IRS announced on Tuesday that it will provide disaster tax relief for all individuals and businesses affected by Hurricane Helene, extending to May 1, 2025 various deadlines that had been in March and April.

This relief applies to Alabama, Georgia, North Carolina, South Carolina and parts of Florida, Tennessee and Virginia. Taxpayers in these areas now have until May 1, 2025, to file various federal individual and business tax returns and make tax payments.

The IRS is offering this relief to taxpayers in any disaster area designated by the Federal Emergency Management Agency.

Among other things, this includes 2024 individual and business returns that are normally due during March and April 2025, along with quarterly estimated tax payments and 2023 individual and corporate returns with valid extensions.

In addition, the IRS is providing penalty relief to businesses that make payroll and excise tax deposits. Relief periods vary by state, and details can be found here.

Retirement plan participants in the affected areas may also seek to take an emergency distribution or loan from their retirement plan to pay for any major damage they have experienced.

Because Hurricane Helene was declared a disaster by FEMA, plan sponsors can provide distribution and loan relief, as permitted under the SECURE 2.0 Act of 2022.

For 401(k), 403(b), 457(b) and profit-sharing plans, the maximum amount of distribution a participant can take from the plan in the event of a disaster is $22,000. Covered distributions, which will not be subjected to the typical 10% hardship withdrawal tax penalty, are those made on or after the first day of an incident period and within 180 days from the date of the disaster declaration.

Plans are not required to offer qualified disaster distributions, but a participant is still allowed to take an in-service withdrawal and fill out tax forms indicating that they used the distribution for a qualified disaster so they are not subject to the 10% penalty. As previously reported, recordkeepers have been slow to make special disaster distributions available as a plan design option.

In addition, if a participant takes a distribution, they do not have to pay income taxes on the full amount in the year they take it, but can instead repay all or part of the distribution over the course of three years. The repayment is treated as a rollover, but a plan is not required to allow repayment of the disaster distribution if it does not accept other rollovers, according to the IRS.

The IRS also announced relief on Tuesday for taxpayers affected by the October 7, 2023, terrorist attacks in Israel and the ensuing regional conflicts, extending 2023 and 2024 return and payment deadlines to September 30, 2025. The IRS identified eligible taxpayers whose principal residence or principal place of business is located in the covered area—which includes Israel, the West Bank or Gaza—based on previously filed returns. More details on these affected taxpayers can be found here.