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Disaster Relief: What The IRS Giveth, The IRS Taketh Away (Part Two)

Disaster Relief: What the IRS giveth, the IRS taketh away. Or so it seems for disaster relief taxpayers until you get to page 4 of the collection notice.

As discussed in Part One, over one million taxpayers living in a disaster area filed their returns early with a balance due, expecting to make a timely payment by the postponed dates. Unfortunately, for taxpayers covered by a disaster declaration the IRS followed its normal collection procedures and mailed an initial collection notice and demand, Notice CP14, reflecting an incorrect due date. The notice also informed the taxpayers that interest and penalties would accrue after the due date reflected on the front page of the notice. This is wrong for taxpayers covered by disaster declarations because payment is not required prior to August 15 or October 16, depending on the disaster area when the original due dates fall within the postponement period. To remedy the incorrect date, the IRS included a short paragraph on the back of page four of the Notice CP14. However, the additional language did not solve the problem. Instead, it led to confusion and questions.

What Is the IRS Doing? What Can Affected Taxpayers Expect?

After receiving complaints from affected taxpayers, the IRS decided to send out updated notices (Notice CP14CL) to clarify that taxpayers covered by disaster declarations do not have to pay before the postponed due date, August 15, 2023, or October 16, 2023. The updated notice will reiterate that early payment or taxpayer response is not needed. Impacted taxpayers should expect to start seeing those letters in the mail shortly.

Bottom Line: Taxpayers covered by a disaster declaration who receive a Notice CP14 should read the entire document including any inserts. The subsequent mailings, CP14CL state, “Since your address of record is located in a federally declared disaster area, the IRS has automatically granted you disaster relief. This gives you an extension of time to file your tax returns as well as make your tax payment listed on the CP14 Notices. You do not need to contact us to get this extra time to pay.”
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Written by TaxConnections Admin | Posted in Disaster Relief

COVID-19 Relief? Think Again!—Corporate Charitable Contributions For Disaster Relief

Since the COVID-19 pandemic hit the United States in early 2020, relief efforts have taken many forms—personal services, legislative efforts, volunteer hours, and even charitable contributions. Yes, when both people and corporations were in the midst of struggles, individuals and companies still made contributions throughout society. Although one hopes charitable contributions are not made for the primary reason of obtaining tax deductions, it is an added benefit that both individual and corporate taxpayers can enjoy under the Internal Revenue Code. That tax benefit was recently enhanced by federal legislation in December 2020 for corporate taxpayers. However, is the “enhancement” as helpful or sweeping as it seems?

Corporate Charitable Contributions, Generally

Generally, corporations cannot deduct charitable contributions that exceed 10 percent of their taxable income for a given tax year. Section 170 of the Internal Revenue Code provides, in part, the following: “The total deductions under subsection (a) for any taxable year (other than for contributions to which subparagraph (B) or (C) applies) shall not exceed 10 percent of the taxpayer’s taxable income.”[1]

For purposes of Section 170(b), “taxable income” is computed without regard to the following: