Tax Reduction for New Mexico Wildfire Victims

The IRS has granted victims of the recent New Mexico wildfires and straight-line winds more time to file various individual and business tax returns and make tax payments. Specifically, victims of the fires and winds that began on April 5, 2022, have until August 31, 2022, to file and pay tax returns and payments due between April 5 and August 30.

The tax relief is available to anyone in any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual assistance. At this point, only affected taxpayers who live or have a business in Colfax, Lincoln, Mora, San Miguel and Valencia Counties qualify for the extensions, but the IRS will offer the same relief to any taxpayers in other New Mexico localities designated by FEMA later.

The IRS will also work with other people who live outside the disaster area but whose tax records are in the disaster area. Call the IRS at 866-562-5227 if you face this situation. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.

Deadlines Extended

The deadlines that are pushed back include the April 18, 2022, due date for filing a 2021 personal income tax return and paying 2021 taxes. In addition, wildfire and wind victims in the designated area have until August 31 to make 2021 IRA contributions. They also get more time to make the estimated tax payments due on April 18 and June 15, 2022.

The due date for quarterly payroll and excise tax returns normally due on May 2 and August 1, 2022, are extended to August 31 for New Mexico wildfire and wind victims, too. Penalties on payroll and excise tax deposits due from April 5 to August 30 will also be waived as long as the deposits are made by August 31, 2022.

Taxpayers don’t need to contact the IRS to get this relief. However, if an affected person receives a late filing or late payment penalty notice from the IRS, he or she should call the number on the notice to have the penalty abated.

Deduction for Damaged or Lost Property

Victims of the New Mexico wildfires and straight-line winds may be able to claim a tax deduction for unreimbursed damaged or lost property. To do so, they typically must itemize and file Schedule A with their tax return. However, victims who claim the standard deduction may still be able to deduct their losses if they can claim them as business losses on Schedule C.

The deduction can be claimed on the tax return for the year the damage or loss of property occurred or for the previous year. So, for any destruction in 2022, the deduction can be claimed on either a 2021 tax year return or a 2022 return. In either case, you must write the FEMA declaration number on the return claiming the deduction. For the recent New Mexico wildfires and straight-line winds, the number is DR-4652-NM.

If you decide to claim a deduction for 2021, you can amend your 2021 return by filing Form 1040X. For this purpose, you must file the amended return no later than six months after the due date for filing your return (without extensions) for the year in which the loss took place. So, for New Mexico wildfire or wind losses in 2022, you would need to file an amended 2021 return by October 16, 2023. Affected taxpayers claiming the disaster loss on a 2021 return should also put the Disaster Designation (“New Mexico Wildfires and Straight-Line Winds”) in bold letters at the top of the form. See IRS Publication 547 for details.