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IRS: Qualified Disaster Treatment of Payments to Victims of Hurricane Sandy

Washington – The Internal Revenue Service today alerted employers and other taxpayers that because Hurricane Sandy is designated as a qualified disaster for federal tax purposes,  qualified disaster relief payments made to individuals by their employer or any person can be excluded from those individuals’ taxable income.

 

IRS: Qualified Disaster Treatment of Payments to Victims of Hurricane Sandy

Qualified disaster relief payments include amounts to cover necessary personal, family, living or funeral expenses that were not covered by insurance. They also include expenses to repair or rehabilitate personal residences or repair or replace the contents to the extent that they were not covered by insurance. Again, these payments would not be included in the individual recipient’s gross income.

The IRS also announced that the designation of Hurricane Sandy as a qualified disaster means that employer-sponsored private foundations may provide disaster relief to employee-victims in areas affected by the hurricane without affecting their tax-exempt status.  Like all charitable organizations, employer-sponsored private foundations should follow the guidance in Publication 3833, Disaster Relief: Providing Assistance Through Charitable Organizations, in providing assistance to employees or their family members affected by Hurricane Sandy.

Related Item: Help for Victims of Hurricane Sandy

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Chile Earthquake Designated as a Qualified Disaster

The IRS today issued Guidance designating the earthquake that occurred in Chile in February 2010 as a qualified disaster for federal tax purposes. The guidance allows individuals who receive qualified disaster relief payments from any person to exclude those payments from income on their tax returns. Also, the guidance allows employer-sponsored private foundations to assist employee-victims in areas affected by this earthquake without affecting their tax-exempt status.

 

Chile Earthquake Designated as a Qualified Disaster

Qualified disaster relief payments include amounts to cover necessary personal, family, living or funeral expenses that were not covered by insurance. They also include expenses to repair or rehabilitate personal residences or repair or replace the contents to the extent that they were not covered by insurance. Again, these payments would not be included in the individual recipient’s gross income.

Qualified disasters include Presidentially declared disasters and any other event that the Secretary of the Treasury determines to be of a catastrophic nature. The IRS has determined that the earthquake that occurred in Chile in February 2010 is an event of a catastrophic nature for purposes of the federal tax law.

The IRS will presume that disaster relief that a private foundation provides to employee-victims and their family members in areas affected by the earthquake in Chile are consistent with the foundation’s charitable purposes.

haiti-child

IRS Qualifies Haiti As A Disaster

The Internal Revenue Service today issued guidance that designates the earthquake in Haiti in January 2010 as a qualified disaster for federal tax purposes. The guidance allows recipients of qualified disaster relief payments to exclude those payments from income on their tax returns. Also, the guidance allows employer-sponsored private foundations to assist victims in areas affected by the January 2010 earthquake in Haiti without affecting their tax-exempt status.

 

IRS Qualifies Haiti As A Disaster

Charities usually fall into one of two categories — public charities or private foundations. Under the tax law, a private foundation that is employer-sponsored may make qualified disaster relief payments to employees affected by a qualified disaster. These payments generally include amounts to cover necessary personal, family, living or funeral expenses that were not covered by insurance. They also include expenses to repair or rehabilitate personal residences or repair or replace the contents to the extent that they were not covered by insurance. Again, these payments would not be included in the individual recipient’s gross income.

Qualified disasters include Presidential declared disasters and any other event that the Secretary of the Treasury determines to be catastrophic. The IRS has determined that the earthquake in Haiti that occurred this month is an event of catastrophic nature for purposes of the federal tax law.

The IRS will presume that qualified disaster relief payments made by a private foundation to employees and their family members in areas affected by the earthquake in Haiti to be consistent with the foundation’s charitable purposes.

Haiti Donations Guidance (pdf)