Although the active fire phase in the Los Angeles area has diminished, those affected by the wildfires are still in the shell-shocked phase. There is an overwhelming amount to be done but it seems almost impossible to move forward yet.
Everyone affected by the wildfires have certain extensions regarding taxes and contributions. The IRS (U.S. Internal Revenue Service) and the FTB (California Franchise Tax Board) have extended tax filing and tax payment deadlines to October 15, 2025 for those who reside in Los Angeles County. Casualty losses for loss not covered by insurance can be tax deductible in 2024 or 2025. In some situations, Los Angeles County may offer property tax relief. Additionally, contributions for retirement and health spending accounts may be temporarily suspended; an individual may have the option to take a special disaster distribution or hardship withdrawal.
Extensions and tax relief should be verified. The following links may help with guidance (links provided, in part, by Global Tax Network 1/21/2025):
IRS Disaster Relief page Los Angeles County fires page Assessor – Disaster Relief
Topic no. 515, Casualty, disaster, and theft losses Disaster loss deduction
Employers have been asking how to support their employees.
For starters, flexible and additional paid time off is needed to meet timing requirements to access their property when allowed. This may require special equipment, like hazmat suits…yet another thing to buy. They may need time to meet with insurance representatives and contractors, look for temporary or replacement housing, and to give their children and/or parents extra attention they may need to work through their loss. An option to work out of the area may give an employee a chance to move near family as well as find temporary housing at a lower price point while rebuilding.
For assistance with temporary housing, questions on assistance, or other needs please reach out to your account manager or Jill Rush at JillR@RelocationToday.com . We can also connect you with David Oltman at INEO.
If an employer wants to assist an employee monetarily, confirmation on the taxability of assistance has now been verified by the U.S. Internal Revenue Service (I.R.S.). The area has been declared as a Federal Major Disaster Zone; this designation allows a company to pay their employee tax-free assistance for expenses not covered by insurance.
For further information and verification, see the “California Wildfires-Latest Tax Implications” statement below provided by David S. Oltman, SCRP, Chief Compliance Officer and Co-Founder of Ineo LLC.
California Wildfires – Latest Tax Implications
The Internal Revenue Service on Friday, January 10 announced tax relief and postponed retirement plan contribution deadlines for victims of the California wildfires. Impacted taxpayers now have until October 15, 2025, to file various federal individual and business tax returns and make tax payments.
The IRS is offering relief to any disaster area designated by the Federal Emergency Management Agency. Currently, any individuals who or households that reside in or have a business in Los Angeles County qualify for tax relief. The declaration allows the IRS to postpone certain tax filing and tax payment deadlines for taxpayers who reside or have a business in the disaster area.
The October 15 deadline will apply to 2024 contributions to individual retirement accounts and health savings accounts for eligible taxpayers, according to the announcement.
In addition, the deadline will apply to individual income tax returns and payments normally due on April 15, as well as calendar-year corporation and fiduciary returns and payments normally due on April 15.
Affected taxpayers who participate in a retirement plan, or an IRA may also be eligible to take a special disaster distribution that would not be subject to the additional 10% early distribution tax and would allow the taxpayer to pay tax on the income over three years.
Participants may also be eligible to make a hardship withdrawal. Each plan or IRA has specific rules and guidance for its participants to follow, and a spokesperson at the IRS says it is important for participants to check with their 401(k) or IRA provider to see what options are available.
President Biden has declared a Major Disaster for California allowing impacted communities and survivors to immediately access funds and resources to get through the coming days and begin to recover from the devastation. As such, employers can give tax-free aid to workers impacted by the California wildfires. Employers can help employees pay for reasonable and necessary personal, family, living or funeral costs and certain other expenses, provided the costs aren’t insured and the assistance doesn’t replace or supplement wages. These qualified disaster assistance payments are tax-free to the worker, deductible by the employer and not hit with any payroll tax.
© Copyrighted, Ineo Tax Service 2025, any question please contact David S. Oltman, Chief Compliance office, Ineo LLC doltman@ineomibility.com
