Disaster relief, tax reform on Congress’ September agenda

After the August recess for Congress, lawmakers to expected to quickly pass disaster-relief tax breaks due to the recent hurricanes. Also expected in September are Congressional hearings on tax reform and tax reform legislation. Lawmakers must also address the federal government’s and IRS budget.

After Hurricanes Katrina and Sandy, Congress passed an extensive disaster relief package, which included many tax provisions. 

If a new bill resembles past disaster relief acts, affected taxpayers could see relaxed casualty loss rules, expanded expensing and more generous depreciation. Past disaster relief laws have also enhanced some tax credits, such as the rehabilitation credit, the low-income housing credit, and the Work Opportunity Tax Credit to encourage rebuilding and hiring. For individuals, Congress could waive the penalty for early distributions from IRAs and certain retirement plans for hurricane-related distributions. 

There is help for affected taxpayers. The IRS postponed various tax filing and payment deadlines that occurred starting on Aug. 23, 2017. As a result, affected individuals and businesses will have until Jan. 31, 2018, to file returns and pay any taxes that were originally due during this period. In addition, the IRS is waiving late-deposit penalties for federal payroll and excise tax deposits normally due on or after Aug.23, 2017, and before Sept. 7, 2017, if the deposits are made by Sept. 7, 2017.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. The IRS will also work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Please contact our office if you have any questions.

GOP leaders in the House and Senate, along with senior administration officials, outlined their ideas for tax reform before the August recess. It is expected that tax reform legislation would originate in the House and Senate tax-writing committees (the House Ways and Means Committee and the Senate Finance Committee). Also predicted is that tax reform would lower and consolidate the individual tax rates, reduce the corporate income tax, and repeal the federal estate tax. 

The federal government’s current fiscal year (FY) ends September 30. In his FY 2018 budget, President Donald Trump proposed to cut the IRS’s budget for FY 2018. 

A bill drafted by the House Appropriations Committee would prevent the IRS from using any appropriations to “implement or enforce” the Affordable Care Act’s individual mandate requiring minimum essential coverage. The ACA generally requires individuals to have minimum essential health coverage or make a shared responsibility payment, unless exempt.