I have reviewed the IRS website and understand there is substantial differences between the way the IRS treatment differs between Rita and Katrina. Please contact your congressmen and senators to see if the different treatment can be resolved You can go to http://www.irs.gov to view both.

The following is the IRS Treatment for Katrina(Rita get very little):

New Tax Law Eases Loss Limitations for Katrina Victims


WASHINGTON — The Internal Revenue Service today is advising taxpayers who suffered casualty or theft losses as a result of Hurricane Katrina about a recent change to the tax law. A new provision lifts certain loss limitations for Hurricane Katrina victims.

Ordinarily, to figure a deduction for a personal casualty or theft loss, you must reduce the loss by $100 and also reduce the total of your casualty and theft losses by 10 percent of your adjusted gross income. Only the excess over these $100 and 10 percent limits is deductible. The new law removes these limits for Hurricane Katrina losses, so that the entire amount is deductible.

To qualify, a loss must be attributable to Hurricane Katrina and it must have occurred after August 24, 2005, in the Presidentially-declared disaster area. The $100 and 10-percent limits still apply to losses that were not caused by Hurricane Katrina.

Like all casualty and theft losses, Hurricane Katrina losses must be claimed as an itemized deduction. If you take the standard deduction you cannot claim them. You cannot claim a deduction for any part of a loss for which you receive or expect to receive insurance or other reimbursement.

Casualty and theft losses are generally deductible only in the year the casualty occurred or the theft was discovered. However, because a Hurricane Katrina loss is a disaster loss, you have the option to deduct it on your tax return for the previous year, 2004. The $100 and 10-percent limits will not apply to that loss in redetermining your 2004 tax. If you have already filed your 2004 return, the loss may be claimed by filing an amended return, Form 1040X, for 2004.

Claiming the loss on an original or amended return for 2004 will provide you an earlier refund, but waiting to claim the loss on this year’s return could result in a greater tax saving, depending on your tax situation for 2005. If you wish to claim the loss for 2004, you generally have until the due date for filing your 2005 return to do so.

You determine your loss for personal use property by first figuring the decrease in its fair market value as a result of the casualty or theft. To do this, you must determine the fair market value of your property both immediately before and immediately after the casualty or theft (counting the value of stolen property as zero). An appraisal is the best way to make this determination, but under certain conditions you can use the cost of cleaning up and repairing the property as a measure of the decrease in value. Compare the decrease in fair market value with your adjusted basis in the property. The adjusted basis is typically the cost of the property and any improvements. From the smaller of these two amounts, subtract any insurance or other reimbursement you receive or expect to receive. Generally, you figure your loss separately for each item, but treat real estate used for personal purposes, such as your home, as one item (including the land, buildings, trees and other improvements).

Taxpayers filing or amending their 2004 tax return and whose only casualty or theft losses to personal use property claimed on that return were caused by Hurricane Katrina should write in red ink “Hurricane Katrina” at the top of Form 1040X. They must also attach the 2004 Form 4684, writing “Hurricane Katrina” on the dotted line next to line 11 and entering “0” on lines 11 and 17.

Taxpayers filing or amending their 2004 tax return and who also have casualty or theft losses to personal use property not related to Hurricane Katrina should disregard the caution directing taxpayers to use only one Form 4684, located above line 13, and complete lines 13 through 18 for two Forms 4684. The Form 1040X and the first Form 4684 should be prepared as explained above for Hurricane Katrina losses only. The second Form 4684 should be prepared in the normal manner for all gains and non-Hurricane Katrina losses. If both Forms 4684 have a loss on line 18, they should carry the combined losses from that line to Schedule A (Form 1040), line 19. If there is a gain on line 15 of the second Form 4684, disregard the instruction to enter it on Schedule D, and instead enter on Schedule A (Form 1040), line 19, the excess of the loss from the first Form 4684 over the gain on line 15 of the second Form 4684.

For 2005, Form 4684 is being revised to reflect the new law for Hurricane Katrina losses.

In addition, if your casualty or theft loss causes your deductions to be more than your income for the year you claim the loss, you may have a net operating loss, or NOL. An NOL can be used to lower your tax in an earlier year, allowing you to get a refund for tax you already paid, or it can be used to lower your tax in a future year. You do not have to be in business to have an NOL from a casualty or theft loss. For more information, see Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts

For more information on deducting disaster losses, see Publication 547, Casualties, Disasters, and Thefts, available on this Web site. Keep in mind that Publication 547 has not been updated to reflect the new law. More information on disaster areas can be found at the Federal Emergency Management Agency (FEMA) Web site (http://www.fema.gov/news/disasters.fema).

Taxpayers who have been affected by Hurricane Katrina and have questions can call the special IRS disaster hotline at 1-866-562-5227.

Links:

Bob and Sherry, Surely the IRS will correct this issue. It may be closer to tax time. They are known for last minute tax laws to make us crazy. I have done taxes in Lake Charles, LA for 13 years and they are always changing things. If you like I can do some reseach on it for you. If you send me your e-mail I can let you know if I find out anything. My e-mail is LAJTC@centurytel.net. What a great tax break not to have that 10% to overcome. The only thing I hate about tax breaks is not all people quailfy to receive them and they can't understand why. For instance a low income family already has no tax liabilty so there is nothing to apply that credit to. So if some one loses their home and is in low income, all the credit in the world won't help them. If they file a NOL as stated in the reading from the IRS, they lose the earned income credit for the year. Which means if you would get a refund this year, you will not get one. If you know anyone in this place please tell them to be very careful before filing a tax return this year. They could lose alot more then they gain.

Thanks for your response. I will email you.

I hope you are correct on the IRS correcting this issue but am very leary. I think it is scary having only a limited period of time between now and the EOY to make critical tax decisions that will have far ranging consequences. Cameron parish was more severely impacted per individual than any other parish in LA or TX. The population was low but the impact on the parish was dramatic. There has been little news coverage in SWLA vrs NO and think this may be the issue. It was a almost total destruction with a larger percentage of houses destroyed but Katrina received the preferred tax treatment.

Someone in the LA government needs to be driving this issue hard with Congress(Vitter, Boustany, Landrieu,Blanco..etc). I would hate to have people that have been impacted by the hurricane and then later by the congress/IRS. It is congress NOT the IRS that sets tax legislation. They will implement what congress passes. Clearly there is no rationale for the different tax treatments between Rita and Katrina. I have emailed all of the above with no response(other than an automated response). I was not suprised... Please email the above requesting equal treatment.

Again, thanks for your help...

We calles Charles Boustany's office today and they asured us that the tax treatment would be the same. They said they just have not updated informationyet on the IRS website. Let's just wait a few days.

FYI

For anyone who might want very detailed information on the Katrina Bill HR 3768 check out this website. It was finalized before Rita ever hit however it has a lot of good detail (which we hope would be amended to apply to Rita). Also interesting articles doing a search on H.R. 3768.

It is titled 'Technical Explanation of H.R. 3768, The "Katrina Emergency Tax Relief Act of 2005" As Passed by the House and the Senate on September 21, 2005.

http://www.house.gov/jct/x-69-05.pdf#search='H.R.%203768'

What H&R Block is doing for Katrina victims.. still no action to have Rita included with the same treatment.

New Tax Law Protects Tax Credits and Eliminates Loss Limits for Victims of Hurricane Katrina
H&R Block is Helping Victims Access Lost Documents, Claim Credits and Deductions; New Law Also Benefits Contributors and Volunteers

FOR RELEASE Sep 22, 2005

KANSAS CITY, Mo. – The Katrina Emergency Tax Relief Act of 2005 helps those who need it most – low- and moderate-income taxpayers who may have otherwise lost important tax benefits as a result of the hurricane, according to H&R Block.

By enabling low- and moderate-income Katrina victims to use their 2004 income to calculate the earned income and child tax credits on their 2005 returns, the new law ensures that those who lost income as a result of the disaster will not have these valuable credits reduced or eliminated. H&R Block lobbied Congressional tax leaders to include the provision.

“By protecting the earned income and child tax credits, the law protects low- and moderate-income Katrina victims from losing their most commonly claimed and most valuable tax benefits,” said Joan Ruff, head of H&R Block’s tax research group.

The provision protecting earned income and child tax credits is one of several in the law that provide tax benefits to Katrina victims. Charitable contributions, housing assistance and certain volunteer activities that support hurricane relief efforts also receive favorable tax treatment.

Other new tax benefits for Katrina victims created by the new law include:


• Limits on casualty losses have been eliminated for disaster victims, thereby increasing the amount of loss that can be claimed. For example, a taxpayer with a casualty loss of $5,000 and income of $20,000 may claim the full $5,000 loss instead of the $2,900 normally allowed.

• The law waives the 10 percent penalty for premature withdrawals from IRAs and other qualified retirement plans, including 401(k) plans, for individuals whose principal residence is in a federally declared disaster area. Also, taxpayers may elect to pay tax on the withdrawal over a three-year period.

• Individuals whose principal residence was damaged or destroyed by the hurricane will receive an extra year to replace the property, giving them a total of five years.

• The law also extends from two years to five years the window for business owners to replace damaged or destroyed property. These provisions enable taxpayers to postpone taxable gain on insurance proceeds.

In addition to benefiting Katrina victims, the new law helps those who have volunteered or donated to hurricane relief effort. These provisions include:

• Cash contributions: The level of permitted tax-deductible cash contributions between Aug. 28, 2005 and Jan. 1, 2006 has been increased from 50 percent to 100 percent of income. Those who make cash contributions may deduct those contributions up to 100 percent of their adjusted gross income. Contributions must be to qualified charities, but need not be earmarked for disaster relief.

• Home-sharing: An individual or family who provides rent-free housing for hurricane victims for two months or longer can claim a special exemption of $500 per individual, with a maximum deduction of $2,000 per household.

• Mileage expenses: The mileage reimbursement rate associated with charitable activities has been increased from 14 cents per mile to 29 cents per mile for Aug. 29-31, 2005, and to 34 cents per mile for Sept. 1 through Dec. 31, 2005. Also, mileage reimbursements paid to volunteers is not taxable.


“Anyone who has contributed time, money or in-kind donations should maintain detailed records of his or her expenses and mileage to ensure the maximum deduction at tax time,” said Ruff. “Likewise, those who’ve been directly affected by the storm should keep track of all expenses incurred in cleaning up and repairing their properties.”

To help hurricane victims receive government benefits as soon as possible, H&R Block is offering Katrina victims free preparation of amended 2004 returns, a fast way of accessing tax refunds by claiming weather- and theft-related losses resulting from the storm. H&R Block is also helping clients access lost tax documents required to claim hurricane-related tax benefits.

“Many people need help right now in identifying and finding the documents required to claim key tax benefits associated with Hurricane Katrina relief,” Ruff said. “We’re able to help reconstruct key tax documents – in our offices – that will help them claim tax refunds.”

FOR ANYONE OUT THERE THAT WANTS MORE INFO FROM H&R BLOCK. THE DISTRICT OFFICE IS OPEN ON MON. AND THUR. ONLY, AT THIS TIME.THE PHONE NUMBER TO THAT OFFICE IS 477-3265. ALSO IF YOU CAN'T GET TO THE H&R BLOCK YOU FILED YOUR RETURN LAST YEAR THEY CAN MAKE SOME PHONE CALLS FOR YOU AND HELP GET THAT RETURN SO IT WOULD BE MUCH EAISER TO AMEND IT. IF YOU HAVE YOUR COPY PLEASE BRING IT WITH YOU WHEN YOU GO TO AMEND OR IF YOU ARE JUST GOING TO FILE THE 2005 AND ARE NEW TO THE AREAR IT WOULD HELP OUT ALOT TO BRING THE COPY IF YOU HAVE IT.

thanks for the research into the tax questions...does anyone know if relief applies to second homes or just permanent residences ???

Only your primary home qualifies for the items in the tax relief. Only if your second home was used as a business or rental property can you get the credits for it.

If you have questions about your tax situation.
I was able to find some numbers that someone may use. The IRS has Tax Assistance Centers to help you with tax questions and problems. The Lake Charles office may not be open yet but they are located at 921 Moss St. I think that's the second floor at the main post office. The Number is 433-1362. The Lafayette office is 825 Kaliste Saloom Rd. Number 269-4036. Baton Rouge 2600 Citiplace Centre. Number 225-343-8625. I do believe these are automated numbers you will reach, but someone is supose to call you back within two business days. You can go to these offices in person if it is convinent for you, if you are in the area. I still have not found the same tax relief for Rita as for Katrina. Mr Boustany's office said they would be the same, but are not yet. The IRS keeps referring to the Katrina Emerency Relief tax act. This most surely needs to be changed.

New Information: The IRS has a disaster relief hotline set up to answer questions about your taxes. I called them this morning and they were very helpful. That number is 1-866-562-5227. What they told me was that the relief given to Katrina victims was to be given to rita victims also. They just named it "The Katrina Emerency Relief Act of 2005" because it was the first one to take place. That if you are in the 31 parish area listed in the area of the disaster you get the same tax relief. You can check these parishes out if you would like on the IRS web site. http://www.irs.gov. Click on the Help for Hurricane Victims. Then go to the Disaster relief page. Then click on IRS updates for Katrina Tax Relief Guidelines and find Louisiana, there you will find the 31 parishes listed. Please call this number and they can help you with your own tax situation. Hope this helps someone.