IRS Offers Assistance to Those Affected by California Wildfires

The relief measures include extended deadlines for 2024 retirement contributions and penalty-free hardship withdrawals for those affected.

The Internal Revenue Service on Friday announced tax relief and postponed retirement plan contribution deadlines for victims of the California wildfires.

Impacted taxpayers now have until October 15, 2025, to file various federal individual and business tax returns and make tax payments.

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The IRS is offering relief to any disaster area designated by the Federal Emergency Management Agency. Currently, any individuals who or households that reside in or have a business in Los Angeles County qualify for tax relief. The declaration allows the IRS to postpone certain tax filing and tax payment deadlines for taxpayers who reside or have a business in the disaster area.

State and local emergency management officials in California estimate the fires cover more than 35,000 acres and have resulted in at least 24 deaths.

The October 15 deadline will apply to 2024 contributions to individual retirement accounts and health savings accounts for eligible taxpayers, according to the announcement.

In addition, the deadline will apply to individual income tax returns and payments normally due on April 15, as well as calendar-year corporation and fiduciary returns and payments normally due on April 15.

Affected taxpayers who participate in a retirement plan or an IRA may also be eligible to take a special disaster distribution that would not be subject to the additional 10% early distribution tax and would allow the taxpayer to pay tax on the income over three years.

Participants may also be eligible to make a hardship withdrawal. Each plan or IRA has specific rules and guidance for its participants to follow, and a spokesperson at the IRS says it is important for participants to check with their 401(k) or IRA provider to see what options are available.

Under the SECURE 2.0 Act of 2022, plan sponsors have the option of providing distribution and loan relief. For 401(k), 403(b), 457(b) and profit-sharing plans, the maximum amount of distribution a participant can take from the plan in the event of a disaster is $22,000.

If an affected taxpayer receives a notice of late filing or late payment from the IRS with an original filing, payment or deposit due date within the postponement period, the taxpayer is advised to call the telephone number on the IRS notice to have the penalty abated.

The IRS may provide additional disaster relief in the future. More information on disaster assistance and emergency relief for individuals and business can be found here.

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