Series 2: Amended Returns

June 7, 2022

 

Can I choose to deduct a federally declared natural disaster loss in the preceding tax year?

Generally, you can elect to deduct a disaster loss in the year you sustain the loss.  This is recognized as the disaster year.

The disaster year is generally the year in which the disaster occurred but may be a year after the disaster occurred. You have a claim for reimbursement with a reasonable prospect of recovery, then you have not sustained a loss until you know with reasonable certainty whether you will receive reimbursement.

You have a loss attributable to a federally declared disaster occurring in an area identified by FEMA as qualifying for public or individual assistance (or both), you may elect to deduct that loss on your return or amended return for the tax year immediately preceding the disaster year. If this election is made the loss is treated as having occurred in the preceding year.

PPL can prepare the correct forms for your disaster loss to be declared in the preceding year.

 

How long does it take for the IRS to process amended returns filed by disaster victims who elect to deduct their disaster related loss in the preceding taxable year?

The IRS expedites processing of amended returns notated with the appropriate disaster information, on the top of page one of Form 1040X, i.e., “Midwestern Disaster Area.” The timeframe is generally 60 days.

 

You filed your taxes on time during a year that a disaster occurred but did not claim a casualty loss on your return. Can wait until a later year to amend the original return to claim the casualty loss deduction reduced by insurance or other reimbursements received in subsequent years?

You can claim a casualty loss deduction for the first time on an amended original return. A casualty loss must be reduced by the amount of insurance proceeds and other reimbursements you received.

 

You filed your taxes on time during a year that a disaster occurred and claimed a casualty loss. Your reimbursements for the loss were received in the year after the disaster. Can you file an amended return for the year you claimed the casualty loss deduction to reduce the loss amount of your reimbursement?

If you properly claimed a casualty loss deduction on an original return and in a later year receive reimbursement for the loss, you do not need to amend the original return.  What you should do is report the amount of the reimbursement in gross income in the tax year in which the reimbursements were received, to the extent the casualty loss deduction reduced your income tax in the tax year that you reported the casualty loss deduction.