Disaster area clients – What you need to know


Severe summer weather has spanned the country and declared disaster areas now span states from Washington to North Dakota to Vermont. Severe summer storms are causing widespread flooding, tornadoes and mudslides across the country.

What do you as a practitioner need to know to best serve your clients?

There often is both federal and state aid available to individuals and businesses located in declared disaster areas. To search disaster areas and determine if your clients are in a declared disaster area, CLICK HERE.

The FEMA site also includes assistance for both individuals and businesses.

More importantly, clients may have automatic extended tax filing deadlines if they are in a disaster area. Recently, it was announced that the IRS had erroneously sent tax due notices to a large number of taxpayers who were in declared disaster areas and had automatically been granted extra time.

Oddly, the last page of the notices included language that told taxpayers they could essentially ignore the rest of the notice, but that did not prevent widespread stress. Real payment due dates can be found on the disaster declaration pages.

In addition to extra time to file and pay, disaster area clients may be entitled to other forms of federal and state assistance. The SBA offers small business loans to organizations in disaster areas.

More information can be found HERE.

Disaster area loans are meant to help cover the costs of resuming business that may not otherwise be covered by insurance.

Taxpayers may also be able to take casualty loss deductions either personally and/or in their business for damages that have occurred. Disaster areas typically have more flexibility in terms of deducting and dealing with losses as opposed to non-disaster areas. Casualty losses are normally limited to 10% of adjusted gross income.

Remind your clients to keep as much documentation as possible. They are likely extremely stressed out if they have just experienced significant personal and professional losses.

They need to take as many pictures as possible, keep detailed logs, and take notes when discussing claims with their insurance companies. Because you will need most of this information too, make it easy for them to share information with you by uploading pictures and notes easily from their phones as they may not be able to access computers right away.

If you have good records of the fixed assets that clients had on hand prior to the disaster, reaching out to offer those logs may be extremely helpful and provide a high value add to your clients.

It is unlikely that they had their original purchase dates and prices of all their assets on hand. Federal disaster areas are typically allowed to claim losses in the tax year immediately preceding the disaster year.
In other words, if your clients recently have found themselves in a disaster area, they can amend their 2022 returns to deduct losses as soon as they are able to determine the amount of the loss.

This may be difficult if they are stuck waiting to determine insurance reimbursement amounts, but this is a critical option to be aware of as it can help put funds back into your clients’ pockets as quickly as possible.

While we may not always think of ourselves as a valuable service provider during these times of natural disaster impacts, our knowledge of resources and support can go a long way to supporting our small business clients.

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