Federal and California Taxpayer Relief: Reprieve From Wet Winter Weather

2023 started California off with weather that escapes recent memory. Rain, snow, and surf seemed unrelenting for the first two weeks of January. While this spell of winter storms has brought snow to our slopes and refilled the state’s reservoirs, we are also cognizant of the adverse effects of this exceptional precipitation in our communities. In response, lawmakers in Sacramento and Washington D.C. have provided relief for taxpayers whose lives were affected by the winter storms.

On January 14, President Biden authorized federal assistance for areas designated by the Federal Emergency Management Agency (FEMA) as affected by the California winter storms. FEMA has declared the following counties as federally designated disaster areas: Alameda, Colusa, Contra Costa, El Dorado, Fresno, Glenn, Humboldt, Kings, Lake, Los Angeles, Madera, Marin, Mariposa, Mendocino, Merced, Mono, Monterey, Napa, Orange, Placer, Riverside, Sacramento, San Benito, San Bernardino, San Diego, San Francisco, San Joaquin, San Luis Obispo, San Mateo, Santa Barbara, Santa Clara, Santa Cruz, Solano, Sonoma, Stanislaus, Sutter, Tehama, Tulare, Ventura, Yolo, and Yuba.

Federal Taxpayer Relief

Individuals and households that reside or have a business in the counties designated above qualify for federal relief provided by the IRS. Most notably, various filing and payment deadlines which occur on or after January 8, 2023, have been postponed until May 15, 2023.

For individuals residing in the affected areas, the new May 15, 2023 deadline now applies to:

• filing of 2022 individual income tax returns due April 18;
• estimated quarterly payments due on January 17 and April 18; and
• 2022 contributions to IRAs and health savings accounts (HSAs) for eligible taxpayers.

For businesses in the affected areas, the May 15, 2023 deadline also now applies to:

• filing and payments for quarterly payroll and excise tax returns due January 31 and April 30;
• farmers and fishermen who would otherwise file and make payments on their 2022 tax returns by March 1;
• filing of 2022 partnership tax returns due on March 15; and
• filing of 2022 corporate returns and payment of estimated quarterly payments due on April 18.

Certain penalties on payroll and excise tax deposits due on or after January 8, 2023, and before January 23, 2023, will also be abated so long as the tax deposits are made by January 23, 2023. The IRS will automatically provide the filing and penalty relief to taxpayers with an IRS address of record within the designated disaster areas, so, there is no need to contact the agency to obtain relief. If you qualify for relief because of the effects caused by the winter storms but live outside of a designated disaster area, you should contact the IRS at 866-562-5227.

In addition to the postponement of the deadlines listed above, individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on the return for either the year the loss occurred (2023, normally filed in 2024), or on the return for the prior year (2022, normally filed this year). The FEMA declaration number associated with these winter storms is 3691-EM, which should be written on any return claiming a disaster loss. See Publication 547 on the IRS website here for more details on claiming disaster losses.

California Taxpayer Relief

The FTB is similarly postponing the filing and payment deadlines which fall on or after January 8, 2023, for individuals and businesses in California until May 15, 2023. This applies to: 2022 individual income tax returns due on April 18 and the quarterly estimated tax payments, due on January 17 and April 18, 2023. Also postponed are the tax returns and payments for businesses whose tax returns are due on March 15, 2023.

In addition, taxpayers in a federally declared disaster area may claim state deductions for a disaster loss when filing their original or amended tax return for tax year 2022. To properly notify the FTB of the disaster, paper filers should write the name of the disaster on the top of their return (or follow the appropriate disaster instructions, if filed electronically). Taxpayers who receive late filing or payment penalties during the postponement period should call the number on the notice to have the penalty abated.

Hopefully, these extended filing and payment periods can alleviate some of the stress and hardship caused by the severe weather. Now that sunshine has returned to the Golden State, we look forward to greener hillsides and spring flowers.

For more information on the tax implications of California’s severe weather, please contact a member of Farella Braun + Martel’s tax team.