IRS Announces Tax Relief for Los Angeles County Wildfire Victims–Tax Updates with CAPATA
In response to the devastating wildfires and straight-line winds that began on January 7, 2025, in Southern California, the Internal Revenue Service (IRS) has announced significant tax relief measures for individuals and businesses in affected areas. These measures aim to provide financial and logistical relief to taxpayers navigating the aftermath of these disasters.
Who Qualifies for Tax Relief?
The IRS has designated Los Angeles County as a disaster area eligible for tax relief under FEMA’s disaster declaration. Taxpayers with an IRS address of record in Los Angeles County qualify automatically. This includes individuals, households, and businesses impacted by the wildfires.
If additional counties are declared disaster areas, the same relief will be extended to those locations. The current list of eligible localities is available on the IRS’s Tax Relief in Disaster Situations page.
Extended Deadlines
The tax relief postpones various filing and payment deadlines originally falling between January 7, 2025, and October 15, 2025. Affected individuals and businesses now have until October 15, 2025, to file returns and make payments. Key deadlines affected include:
- 2024 Individual Income Tax Returns and Payments: Normally due April 15, 2025.
- 2024 Quarterly Estimated Income Tax Payments: Originally due January 15, April 15, June 16, and September 15, 2025.
- Quarterly Payroll and Excise Tax Returns: Originally due January 31, April 30, and July 31, 2025.
- 2024 IRA and Health Savings Account Contributions: Contributions for the 2024 tax year are now extended.
- Calendar-Year Partnership and S Corporation Returns: Originally due March 17, 2025.
- Calendar-Year Corporation and Fiduciary Returns and Payments: Originally due April 15, 2025.
- Calendar-Year Tax-Exempt Organization Returns: Originally due May 15, 2025.
Additionally, penalties for payroll and excise tax deposits due between January 7 and January 22, 2025, will be waived if deposits are made by January 22, 2025.
Uninsured or Unreimbursed Disaster Losses
Taxpayers can claim losses related to the wildfires on their 2025 tax returns or elect to claim them on their 2024 returns. For individual taxpayers, the deadline to make this election is October 15, 2026. Be sure to include the FEMA declaration number –4856-DR—on any return claiming a loss.
Qualified Disaster Relief Payments
These payments are generally excluded from gross income and may cover:
- Personal, family, living, or funeral expenses.
- Home repair or rehabilitation costs.
- Replacement of household contents.
For more details, consult IRS Publication 525, Taxable and Nontaxable Income.
Retirement Plan Relief
Affected taxpayers may access special provisions for retirement plans and IRAs, including:
- Disaster distributions exempt from the 10% early withdrawal penalty.
- The ability to spread income tax liability on distributions over three years.
- Eligibility for hardship withdrawals.
Plan participants should refer to specific guidance provided by their plan administrator or IRA provider.
Relief for Taxpayers Outside Los Angeles County
Taxpayers living outside the disaster area but whose records necessary to meet a deadline are located in the affected area may also qualify for relief. This includes workers affiliated with recognized government or philanthropic organizations assisting with disaster relief.
To request relief, taxpayers can contact the IRS disaster hotline at (866) 562-5227. Disaster-area tax preparers can also file bulk requests on behalf of clients.
State Tax Implications
Currently, the California Department of Finance has not announced whether it will provide parallel relief for state income and franchise taxes. Updates will be provided as they become available.
How to Seek Assistance
At CAPATA, we are dedicated to supporting our clients through these challenging times. If you believe you qualify for relief or have questions about how these changes impact your filings, please contact us at adminteam@capatacpa.com or call 949-364-0334.
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