U.S. IRS Tax Filing Deadline Nears For 'Mainland Movers' After $200B Record-Breaking Hurricanes
Debris sits in front of a damaged school after Hurricane Irma at Coral Bay in St John, U.S. Virgin Islands, on September 12, 2017. After being struck by Irma, the U.S. Virgin Islands could not look less like a tourist destination. Many local residents were getting out after losing everything to the category 5 storm even though the U.S. authorities said they would initiate rebuilding. Puerto Rico and American Samoa also sustained heavy damage. (Photographer: Michael Nagle/Bloomberg).
By Roger Aitken
The United States’ Internal Revenue Service (IRS) has reminded any residents of Puerto Rico, the U.S. Virgin Islands and American Samoa impacted by last year’s massive hurricanes and tropical storms who are required to file a 2017 federal income tax return or pay their 2017 tax, to ensure by June 29 they do so.
As of last November while the costs were still being totted up, early indications suggested that the U.S. had suffered over $200 billion worth of damage from seventeen named storms during the season, which began on June 1 2017. This easily exceeded surpassed the previous record in 2005 of around $159 billion that summer when Hurricane Katrina caused huge devastation on New Orleans during a period when some 28 named storms formed.
Most of last summer’s hurricane damage on the U.S. coastline – around Texas and Florida – and offshore was caused by the trio of Harvey, Irma and savage hurricane Maria that rocked Puerto Rico with winds in excess of over 150 miles per hour (mph).
The damage brought by Harvey had been estimated early after it struck in September at around $180 billion. A more conservative number put out by Bloomberg Business ventured the combined total from Harvey, Irma, and Maria at $202.6 billion. However, these costs were early calculations and the 2017 Atlantic hurricane season has been estimated at just north of $282 billion.
IRS Extended Deadline
The special “extended deadline” from the IRS is available regardless of whether a taxpayer’s residence changed during 2017. No interest, late-filing penalty or late-payment penalty will be due.
Moreover, bona fide residents of Puerto Rico, the U.S. Virgin Islands and American Samoa, who permanently relocated to the U.S. mainland due to last year’s hurricanes and tropical storms may need to file Form 8898, Statement for Individuals Who Begin or End Bona Fide Residence in a U.S. Possession, with the IRS along with their Form 1040 or Form 1040NR.
Due to the disaster-related extensions granted by the IRS to residents of these three U.S. territories, Form 8898 will generally be due by Friday, June 29, 2018. In addition, anyone who files for an income-tax-filing extension will also have until October 15, 2018, to file Form 8898.
“This requirement to file Form 8898 applies to anyone who had total gross income exceeding $75,000 for the year, ceased to be, or became, a bona fide resident of a U.S. territory during 2017 and met other requirements,” a communiqué from the IRS stated.
Also referred to as “U.S. possessions”, U.S. territories include Guam and the Commonwealth of the Northern Mariana Islands, along with Puerto Rico, the U.S. Virgin Islands and American Samoa.
The IRS added: “Bona fide resident status matters because special tax rules may apply to anyone who is a bona fide resident of a U.S. territory, compared to a resident of any of the fifty states or the District of Columbia.’’ (Note: For a Tax Guide for Individuals with Income from U.S. Possessions see Publication 570).
Kirstjen Nielsen, the U.S. Homeland Security Secretary, speaks during a visit to the National Hurricane Center on May 30, 2018 in Miami, Florida. The Homeland Security Secretary visited the center to urge people to prepare for the upcoming hurricane season that officially began on June 1, 2018 and ends on November 30th. (Photo by Joe Raedle/Getty Images).
2017 Qualified Disaster
In terms of a “2017 qualified disaster”, this includes Hurricane Harvey and Tropical Storm Harvey, Hurricane Irma, Hurricane Maria, and the California wildfires. These disasters occurred in calendar year 2017 in areas determined by the President of the United States under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, which was signed into law on November 23, 1988, to warrant federal disaster assistance.
For married couples, the requirement to file Form 8898 with the IRS applies to each spouse separately. Likewise, the $75,000 income threshold applies to each spouse separately.
Should a person who is required to file Form 8898 fails to file or files an incorrect or incomplete Form 8898, a $1,000 penalty may apply.
A taxpayer is generally a bona fide resident of a U.S. territory if they satisfy the following, namely:
- Meet the presence test – and spend at least 183 days in the territory;
- Do not have a tax home outside the U.S territory; and,
- Do not have a closer connection to the United States or to a foreign country than to the U.S. territory.
“Generally, this means that a person who lives and works in a U.S. territory and spends most of their time there is considered a bona fide resident of that territory,” the IRS explained. Special residency rules apply for active duty military members of the U.S. Armed Forces and their civilian spouses.
Puerto Ricans and U.S. Virgin Islanders who temporarily left due to hurricanes Irma or Maria, but have already returned to the territory, or plan to do so, will generally speaking not need to file Form 8898.
This is because under special relief, none of the time between September 6, 2017, and May 31, 2018, counts as time away from the territory. For more information in relation to this see Notice 2018-19, and Publication 570.
Days of Presence in a U.S. Territory
In essence and generally, an individual is considered to be present in a relevant possession on any day they are outside the relevant possession because they leave or are unable to return during any 14-day period within which a major disaster occurs in the relevant possession for which a Federal Emergency Management Agency (FEMA) notice or a federal declaration of a major disaster is issued in the Federal Register. FEMA is an agency of the U.S. Department of Homeland Security, which was initially created by Presidential Reorganization Plan No. 3 of 1978.
Due to hurricanes Irma and Maria, the 14-day period of absence resulting from a major disaster, which does not count against your days of presence outside a relevant U.S. territory, has been extended to 268 days effective beginning September 6, 2017, and ending May 31, 2018.
As such an individual who is outside of Puerto Rico or the U.S. Virgin Islands on any day during this 268-day period will be treated as leaving or being unable to return to the relevant U.S. territory as a result of these hurricanes, and will not lose their status as a bona fide resident of Puerto Rico or the U.S. Virgin Islands during this period. For more information, see Notice 2017-56 and Notice 2018-19.
The IRS provided federal income tax return filing and penalty relief to anyone whose mailing address is in Puerto Rico, the U.S. Virgin Islands or American Samoa. Eligible hurricane and tropical storm victims with a mailing address elsewhere, can also obtain this relief by calling the IRS disaster hotline at 866-562-5227.
For additional information see the IRS’ disaster relief page. A 22-page document, Publication 976 (February 2018), from the U.S. Treasury – Internal Revenue Service also provides greater detail and definitions on disaster relief.