It’s never too early or too late to file 4684 (until it’s too late which is 2027 for Hurricane Ian)

Some of the residents of Florida are playing a waiting game, hoping that Hurricane Ian will be “qualified” and thus achieve better tax treatment. We discussed in this article how it’s unlikely that Ian will ever be qualified owing to the political challenges of a Presidential election coupled with a tax code that’s due to run out in 2025.

In our last article, we talked about Tom and Bob. Bob has already filed his 4684 and gotten about $53K in benefit. Tom decided to wait for qualification. It’s now been two tax years, and it seems qualification is unlikely for the reasons we discussed.

Given the two years he’s waited, how much longer should Tom hold out hope or should he simply file now and get his benefit?

First thing First: How long can you wait?

The IRS will allow you to amend the past three years of taxes. Hurricane Ian occurred in September of 2022, so you’ve got about one more year before you absolutely need to amend and claim your recovery if you have not done so.

Technically the IRS says that you have until three years after the “Tax Filing Due Date” to amend a tax filing. That means you have until April 15 of 2026 before you MUST amend or lose it. If you filed an extension for your 2022 taxes, then the deadline is October 15 of 2026. At that point you’ll be amending three years of filings.

Let’s assume you make $90K, itemize $29K, have a $460K house with a residual value of $357K, your benefit would be $50,213:

If the event is qualified, your benefit will be $51,891. That’s $1,678 more than “regular”.

There are two scenarios to consider:

1.      You’re in debt

2.      You’re not in debt

Let’s take a look at each situation.

1.      You’re in Debt

If you’ve borrowed money to help pay for rebuilding, you will want to consider how much that loan is costing you. Assume you borrowed $50,000 at 5.27% interest on a 10 year loan. The interest on the loan over the term is $14,434.

Let’s say you decide to amend 2022 and 2023 when you file your 2024 taxes next April to get your recovery started (or you can do it right now if you want the money right away). You’ll immediately get back $20,621. PLUS, for the next five years, you’ll get back about $6,700 per year.

You can take the initial recovery and refinance your loan. That alone would save you about $3,105 in interest. But you’re smart and you use that extra $6,700 you’re getting back per year and pay off the loan early.

You’ve now saved $7,139 in interest!  That’s way more than you’ll get by waiting for Qualification. And… BONUS.. You’re debt free by 2028.

The lesson is simple – If you need money now, you’re better off filing NOW. 

2.      You’re not in Debt

Good For you! What would you do with a check for $20,621 today? Sure, a new car might be fun, or a new deck or pool for the house, but let’s do the sensible thing and put that money to work! (I know… BORING!)

At 5% interest, over the next two years you’ll earn $2,401 in interest. Also, because you only amended two years taxes, instead of the three you would have done in 2026, you save $500. You end up with $1,223 more than if you waited for qualification!

Once again, the lesson is simple – Money today is better than money tomorrow, so you’re much better off filing NOW.

Does it ever make sense to wait?

There is one case where it might make sense to try to wait for qualification. This is the case where you have low income and low Schedule A deductions.

But let’s look at the following scenario:

In this case, if you wait for qualification, you’ll get $15,027 which is a lot more than $5,451.

But let’s take a closer look. Our “What If” function lays it out for you:

In this case, if you file right away, and then amend, you end up with $9,345. If you wait to file until the event is qualified, it costs you $742 more! And what if the event is never qualified? You’ve lost out on over $2K. 

Even if you’re doing your own taxes, or you use a no-cost tax preparation service, it still does not make sense to wait:

Lesson learned --- When it comes to the Casualty Loss Program, it just makes sense to file ASAP.

If you or someone you know has been affected by Hurricane Ian, we’re happy to help. You can always use our free online Tax Savings Estimator with the “What If” function to figure out your best move or contact us for more information.

File Now: It's a great time to approach your tax preparer as they won't be as busy now as they will be in April. It won't cost you any money up-front if you use a Tax Prep service like Liberty! Taxpayers claiming the disaster loss on their return should put the Disaster Designation, "FL Hurricane Ian" in bold letters at the top of the form. Be sure to include the FEMA disaster declaration number, DR-4673-FL, on any return. See Publication 547 for details.