The CPA Journal

FEDERAL TAXATION

Federal and State Tax Relief for September 11 Victims

By Stewart Berger, CPA,

Weinick Sanders Leventhal & Co. LLP

IRS Notice 2001-61 provides the details for the tax relief offered to taxpayers affected by the terrorist attacks of September 11. President Bush issued federal disaster declarations on September 11 and September 13 that cover Bronx, Kings, New York, Queens, and Richmond counties in New York and Arlington County in Virginia.

Federal Relief

In accordance with the disaster relief provisions under IRC sections 6081, 6161, and 7508A, IRS Notice 2001-61 provides the following tax relief for taxpayers affected by the terrorist attacks:

Individuals located in the affected counties and other individuals that are affected taxpayers (see below) and have filed extensions for their 2000 federal individual tax returns beyond September 10, 2001, will have their filing date postponed until February 12, 2002. The IRS will also waive a failure to pay penalties for the period from September 11, 2001, to January 9, 2002 (120 days).

Affected nonindividual taxpayers are granted both a 120-day postponement and a six-month extension to file returns originally due between September 11 and November 30, 2001, and to pay the taxes on those returns without penalties or interest.

Calendar-year corporations and other entities that currently have six-month extensions to file Federal tax returns that expire between September 11, 2001, and November 30, 2001, will have an additional 120 days to file their returns (i.e., until January 15, 2002). Again, failure-to-pay penalties will be waived for the period from September 11, 2001, to January 9, 2002.

The due date of any estimated 2001 tax payment originally due between September 11, 2001, and January 15, 2002, is postponed until January 15, 2002, for taxpayers located in the affected counties and other affected taxpayers.

Taxpayers required to make federal tax deposits that have difficulty making them due to the terrorist attacks are not subject to the failure-to-timely-deposit penalties if the deposit is made on or before November 15, 2001. According to IRS Notice 2001-61, this relief extends only to those taxpayers unable to meet deposit obligations because of damage to records, computers, or essential supporting services, or injury to essential personnel. Taxpayers should write "September 11, 2001, terrorist attack" in red ink at the top of such returns.

Section 301.7508A-1(d)(2) of the Procedures and Administrative Regulations identifies taxpayers affected by disasters as the following:

Victims of the crashes, those in the planes and on the ground

All workers assisting in the relief activities in the disaster areas and at the Pennsylvania site

Taxpayers whose place of employment is located within the disaster areas

Taxpayers that are not located in the disaster areas but whose books and records are maintained in the area. This exception should be useful to taxpayers living or working outside the disaster area whose accountants work within the disaster areas.

Taxpayers that have difficulty in meeting their federal tax obligations because of disruptions in the transportation and delivery of documents by mail or private delivery services resulting from the terrorist attacks and that do not otherwise qualify under IRC section 7508A, are also deemed affected taxpayers, but to a limited extent. These taxpayers will have until November 15, 2001, to file returns and make payments that were required between September 11 and October 31, 2001.

Disaster relief provisions of Section 7508A apply not only to the filing of income tax returns but also to the payment of income, estate, gift, and generation-skipping transfer taxes; the making of contributions to qualified retirement plans; the filing of Tax Court petitions; the filing of refund claims; and certain other acts.

State Relief

New York State issued Notice N-01-14, which generally extends for up to 90 days the filing of any returns due and the payment of any amounts owed. "WTF" must be written at the top of the form, and a brief statement of how the disaster affected the ability to meet tax deadlines should be attached. New York City has generally provided for a filing extension until December 17, 2001. Other states are also providing for extensions.

Editor:
Edwin B. Morris, CPA
Rosenberg, Neuwirth & Kuchner

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