In a letter submitted to the Internal Revenue Service (IRS), the American Institute of CPAs (AICPA) requested that the Department of the Treasury and the IRS consider updating Draft Publication 547, Casualties, Disasters, and Thefts, to ensure that the publication provides clear direction to taxpayers regarding the disasters that are covered by the Federal Disaster Tax Relief Act of 2023 (FDTRA). Currently, there is a lack of clarity in the draft publication that may lead taxpayers or tax practitioners to misinterpret the criteria for qualified disaster losses.
The AICPA cites the need for these updates to ease the confusion created by disaster relief due to the multiple deadlines for various actions necessary to be eligible for the qualified disaster loss. In addition, recent disaster relief has been relegated to the legislative text instead of being accessible via the Internal Revenue Code, which makes locating and understanding the provisions even more difficult.
The AICPA recommends the following:
- Amend Draft Publication 547 to provide greater clarity to taxpayers when discussing disaster tax relief under the FDTRA. Specifically, Draft Publication 547 should provide as follows in both locations discussing the FDTRA:
A major disaster that (i) was declared by the President during the period between January 1, 2020, and February 10, 2025, (ii) has an incident period that began on or after December 28, 2019, and on or before December 12, 2024, and (iii) has an incident period that ended no later than January 11, 2025. - Provide in the final version of Publication 547:
A link to the IRS’s disaster relief website that would provide a comprehensive list of federally declared disasters to which the FDTRA is applicable.
A link to Disasters and Other Declarations | FEMA.gov to verify the disasters that constitute federally declared disasters and qualify for special treatment.
“Draft Publication 547 contains confusing and/or misleading information on the provisions of FDTRA needed for disaster victims in the preparation of their income tax returns,” says Daniel Hauffe, Senior Manager, AICPA Tax Policy & Advocacy. “Updating this publication would help taxpayers and tax practitioners readily determine whether they or their clients are eligible for disaster tax relief.”
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Tags: Accounting, Taxes
