The Internal Revenue Service is closely watching the situation in Southern California and will soon issue specific guidance for victims of the wildfires.
In the meantime, if you own property damaged by fire in the presidential disaster area, you have a choice: You may claim uninsured or unreimbursed disaster losses by filing an amended 2006 tax return or you may wait and claim any losses on your 2007 return.
Individuals and businesses are both eligible for these options. Claiming the loss on your 2006 return will get you an earlier refund, when you may need it the most. On the other hand, waiting to claim the loss on your 2007 return could result in greater tax saving, depending on other income factors. Although the damaged property must be located in one of the disaster-area counties, you need not live or work in the disaster area to make this choice.
The following online resources may be of help to those who have suffered losses (You’ll find the links in the resource box below):
FAQs for Disaster Victims
IRS Publication 547, Casualties, Disasters and Thefts
IRS Publication 584, Casualty, Disaster and Theft Loss Workbook
IRS Publication 584-B, Casualty, Disaster and Theft Loss for Businesses Workbook[TaxMama Note: Although I’ve never seen this kind of extensive fire activity in California in all the years I’ve lived here (where thousands of people have been evacuated from their homes, AND many homes have burned), none of the areas have been designated Presidential Disaster Areas, yet. So be careful. Don’t jump the gun and file forms as if they were. No doubt, pressure will be put on President Bush to make the declaration.]
Ask TaxMama :: Where taxes are fun and answers are free
- TaxQuips.com :: The number ONE free Tax Podcast online
- IRS FAQs :: FAQs for Disaster Victims
IRS Publication 547 :: Casualties, Disasters and Thefts
- IRS Publication 584 :: Casualty, Disaster and Theft Loss Workbook
- IRS Publication 584-B :: Casualty, Disaster and Theft Loss for Businesses Workbook