03.02.01

Taxpayers Can Claim Earthquake Losses On 2000 Income Tax Returns

Those suffering damages won't have to wait until 2002

WASHINGTON, D.C. — The Internal Revenue Service released the following statement today, announcing that taxpayers affected by February 28th earthquake can claim their losses on their 2000 Federal Income Tax Returns:

Taxpayers who suffered damages as a result of the February 28 earthquake in Washington State do not have to wait until next year to claim their casualty looses. They can claim them on their 2000 returns, enabling them to receive possible refunds this year.

On March 1, President Bush approved a request for disaster assistance, declaring the state a federal disaster area. "Because of the declaration, a casualty loss caused by the earthquake may be claimed either on the 2001 return filed next year or the 2000 return," said Judy Monahan, IRS spokesperson.

Under federal tax law, individuals and businesses who suffer casualty losses because of a federal disaster can claim the losses on their tax returns either for the year of the loss or for the prior year. If you have already filed your federal income tax return, claiming a loss against 2000 taxes by filing an amended return will normally result in a refund (if all taxes have been paid). This option enables taxpayers to obtain more immediate financial relief.

To claim their casualty loss from the earthquake on a previously filed tax return, Washington taxpayers need to file Form 1040X, Amended U.S. Individual Income Tax Return, with the Ogden Service Center. They should write "Washington Disaster" in red at the top of the return so that service center personnel will expedite processing.

Casualty losses are generally reduced by the total of insurance or other reimbursements, $100, and 10 percent of the taxpayer's adjusted gross income.

Taxpayers are encouraged to contact their tax advisors for help in determining the best option. They can call the IRS toll-free line, 1-800-829-1040 (available 24 hours a day, seven days a week), with questions about casualty losses. More information can be found in IRS Publication 547, Casualties, Disasters, and Thefts, available by calling 1-800-829-3676 (1-800-TAX-FORM). Some libraries carry IRS forms and publications on CD-ROM, and they can be downloaded free of charge from the IRS Web site, www.irs.gov.