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Agencies Give Tax Filing and 401(k) Withdrawal Relief to Hurricane Irma Victims

14 Sep 2017 10:07 AM | Bill Brewer (Administrator)


Businesses affected by Hurricane Irma in parts of Florida and elsewhere have until Jan. 31, 2018, to file certain tax returns and make tax payments, the Internal Revenue Service (IRS) announced this week.

The IRS also announced that 401(k)s and similar employer-sponsored retirement plans can expedite loans and hardship distributions to victims of Hurricane Irma and members of their families. This is similar to relief that the IRS granted last month to victims of Hurricane Harvey.

Eligible retirement plan participants can access their money more quickly with a minimum of red tape, the IRS said. In addition, the six-month ban on 401(k) and 403(b) contributions that normally affects employees who take hardship distributions will not apply.

A person who lives outside the disaster area also can take out a retirement plan loan or hardship distribution and use it to assist a son, daughter, parent, grandparent or other dependent who lived or worked in the disaster area.

Plans will be allowed to make loans or hardship distributions before the plan is formally amended to provide for such features. Plans can ignore the reasons that normally apply to hardship distributions, thus allowing them, for example, to be used for food and shelter. If a plan requires certain documentation before a distribution is made, the plan can relax this requirement as described in IRS Announcement 2017-13.

The IRS emphasized that the tax treatment of loans and distributions remains unchanged. Ordinarily, retirement plan loan proceeds are tax-free if they are repaid over a period of five years or less. Under current law, hardship distributions are generally taxable and subject to a 10-percent early-withdrawal tax.

Additional 401(k) Relief Sought

House Ways and Means Committee Chairman Rep. Kevin Brady, R-Texas, is considering legislation that would not only suspend, in hurricane-affected regions, the 10 percent penalty imposed when 401(k) plan participants tap their 401(k) retirement savings before age 59.5. "It will include tax provisions, some of which will help people access their retirement funds without penalty for rebuilding activities," he told reporters on Sept. 7.

Tax Filing Relief

The tax-relief action announced by the IRS postpones various tax filing and payment deadlines starting on Sept. 4, 2017, in Florida and Sept. 5, 2017, in Puerto Rico and the Virgin Islands. Affected businesses will have until Jan. 31, 2018, to file returns and pay any taxes that were due during this period, including quarterly estimated tax payments.

In addition, the IRS is waiving some late-deposit penalties for federal payroll and excise tax deposits normally due during the first 15 days of the disaster period, which began Sept. 4 in Florida. The IRS is offering this relief to disaster areas designated by the Federal Emergency Management Agency, as listed on the disaster relief page at IRS.gov.

Hurricane Irma "has been a devastating storm for the southeastern part of the country, and the IRS will move quickly to provide tax relief for victims, just as we did following Hurricane Harvey," said IRS Commissioner John Koskinen in a statement. "The IRS will continue to closely monitor the storm's aftermath, and we anticipate providing additional relief for other affected areas in the near future."

Pension Payment and Filing Relief

The IRS, the Department of Labor and the Pension Benefit Guaranty Corporation (PBGC) alsoannounced in Notice 2017-49 that they are providing affected employee benefit plan sponsors with relief from certain filing requirements under the Employee Retirement Income Security Act.

Separately, the PBGC said that it is waiving certain penalties and extending certain filing deadlines for defined benefit pension plan sponsors in response to Hurricane Irma. For example, if affected plans have premium filing deadlines from Sept. 4, 2017, through Jan. 31, 2018, the PBGC will waive applicable penalties but not the applicable interest charge.

Preparing for the Next Disaster—or Everyday Emergencies

While many plan sponsors will focus on the immediate impact of Hurricanes Harvey and Irma, "plan sponsors might also take this time to plan for the future or to refine existing policies designed to assist employees year-round," Jack Towarnicky, executive director at Plan Sponsor Council of America, a trade group, advised in a blog post.

Leave-sharing and employee donation plans are examples of policies that employees can have in place for personal emergencies as well as natural disasters.

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Source: The Society for Human Resource Management

https://www.shrm.org/ResourcesAndTools/hr-topics/benefits/Pages/Hurricane-Irma-tax-filing-relief.aspx?utm_source=SHRM%20Thursday%20-%20PublishThis_HRDaily_7.18.16%20(71)&utm_medium=email&utm_content=September%2014%2C%202017&SPMID=00330610&SPJD=07%2F25%2F1996&SPED=04%2F30%2F2018&SPSEG=&SPCERT=&spMailingID=30600092&spUserID=ODM1OTI0MDgxMjMS1&spJobID=1121693306&spReportId=MTEyMTY5MzMwNgS2

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