Tax Lawyer's Blog

There are a lot of little gems buried within the four corners of the Housing and Economic Recovery Act of 2008.

Here’s another one.

IRS Notice 2008-95 allows taxpayers who claimed losses for damage to their primary residences caused by Hurricanes Katrina, Wilma or Rita to elect to amend their returns to reduce those losses by the amount of any hurricane relief grants they received in subsequent years.

The general rule is that casualty losses are claimed on the tax return for the year in which the loss occurred and subsequent “recoveries” or reimbursements are included in income on the tax return of the year in which they are received.

IR-2008-115 states,

[T]axpayers have one year to pay back any resulting tax due, penalty-free and interest-free. To qualify for this relief, these amended returns must be filed by July 30, 2009, and the entire resulting tax due paid by July 30, 2010, in most cases. The notice also provides special instructions for those taxpayers who have already filed an amended return.

Taxpayers should write the words, “Hurricane Grant Relief” in dark, bold letters at the top of their amended return, Form 1040X, and mail it to: Internal Revenue Service Center, Austin, TX 73301-0255.

Author’s Advice: The filing of an amended return is an election. It is not mandatory. You should consult a qualified tax advisor before filing an amended return as it will not result in a tax savings in all cases.

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