The Internal Revenue Service is attempting to respond to the victims of Hurricane Sandy by waiving certain taxes. Most notably, the IRS announced earlier this month that qualified disaster relief payments made to individuals by their employer or any person can be excluded from those individuals’ taxable income.
Qualified disaster relief payments include costs to cover necessary personal, family, living or funeral expenses that were not covered by insurance. They also include expenses to repair or rehabilitate personal residences or repair or replace the contents to the extent that they were not covered by insurance.
Any of these qualified payments will not be included in the individual’s gross income.
The IRS also announced that the designation of Hurricane Sandy as a qualified disaster means that employer-sponsored private foundations may provide disaster relief to employee victims in the areas affected by Hurricane Sandy without affecting their tax-exempt status. Like all charitable organizations, employer-sponsored private foundations should follow the guidance in Publication 3833, Disaster Relief: Providing Assistance Through Charitable Organizations.
In another effort to help victims of the hurricane, the IRS has responded to shortages of clear diesel fuel by not imposing tax penalties when dyed fuel is sold for use on the highway. This relief will remain in effect through November 20, 2012 – but only in New Jersey, New York and Pennsylvania.
Ordinarily, dyed diesel fuel is not taxed the normal rate of 24.4 cents per gallon because it is sold for uses exempt from excise tax, such as to farmers for farming purposes, for home heating use, or to local governments for buses.
The IRS is closely monitoring the diesel fuel situation in the states affected by Hurricane Sandy and will provide additional or extended relief as needed.