IRS Loosens Rules to Help Ease Hurricane Hardships

hurricane harvey texas

IRS rule changes to benefit hurricane victims in affected areas

If you live in States such as Texas, Louisiana, Arkansas, Kentucky, or Tennessee, you know the meaning of “problems” as they relate to hurricanes. In order to ease the devastation caused by Hurricane Harvey, the IRS is allowing taxpayers to take emergency loans from their retirement plans. These hardship distributions are to be used to help hurricane victims as well as family members who were victims. This idea is not new. In fact it has been used to aid victims of earlier floods and hurricanes.

We are fairly certain that these tools will also be used to help victims of Hurricanes Irma and Maria which have hit Texas, Florida, Puerto Rico and other small islands.

For now, certain parts of Texas qualify for assistance. To see a list of eligible counties in the State, visit https://www.fema.gov/disasters. In order to enact this program, hardship withdrawals must be made on or before January 31, 2018.

While persons within the affected areas can make withdrawals from their own retirement accounts (within the statutory limits of the plan), relatives living outside of the area are also allowed to make withdrawals from their plans if they use the funds to help their children, parents or grandparents living in the affected areas.

Typically this type of plan requires substantial documentation before a loan distribution may be made. According to IRS Announcement 2017-11, the typical requirements have been relaxed.

In a recent press release the IRS emphasized that the tax treatment of retirement plan loans remains the same. That is, retirement plan loans approved by the IRS are tax-free and penalty-free if they are repaid within a 5-year period under the terms of the plan. Other loans or distributions that fall under general retirement plan rules are subject a 10% early withdrawal penalty as well as income tax.

For more information about tax relief programs related to Hurricane Harvey, visit the IRS disaster relief page. More information on government-wide relief efforts is available at www.USA.gov/hurricane-harvey.

Tax Records Lost in Hurricane Harvey, Irma or Maria?

Any flood-affected taxpayer can use the free Get Transcript online tool on the IRS’s website to securely view and print a summary of key tax information for their filing and accounting needs. They can also call toll-free at (800) 908-9946 to order or submit IRS Form 4506-T so they can receive by mail, their IRS transcripts.

If you need your tax information, be sure to write on the top of the form in red ink a description of the appropriate disaster designation, such as “Hurricane Harvey”, so that you may avoid fees and expedite processing of your order. If you are mailing the form, follow the same instructions.

If you have questions about the tax implications of helping a relative in the hurricane flood affected areas feel free to contact the Tax Resolution Institute at (877) 829-8370 for immediate assistance.

2017-10-24T10:26:27+00:00 October 24th, 2017|IRS News, Tax Attorney, Tax Law, Tax Resolution Experts|