IRS & State of California Fires Tax Relief – California Los Angeles County Fire & Wind Disaster January 2025

Employer Pension Funding Postponement Available to Oct 15

Though the IRS California disaster notices specifically mentioned the postponement for timely filing of IRA and HSA payments for tax year 2024 to October 15, 2025, employer pension contributions were not mentioned. See our excerpt from I.R.C. § 7508A(b), below, for regs on the employer funding postponement. Also check with your pension administrator.

I.R.C. § 7508A(b) Special Rules Regarding Pensions, Etc. — 

In the case of a pension or other employee benefit plan, or any sponsor, administrator, participant, beneficiary, or other person with respect to such plan, affected by a disaster, fire, or action described in subsection (a), the Secretary may specify a period of up to 1 year which may be disregarded in determining the date by which any action is required or permitted to be completed under this title. No plan shall be treated as failing to be operated in accordance with the terms of the plan solely as the result of disregarding any period by reason of the preceding sentence. 

Tax Deferred Exchange (§1031) and Other Federal Tax & Time Sensitive Deadlines

The IRS also gives affected taxpayers until October 15, 2025, to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2018-58, 2018-50 IRB 990 (December 10, 2018), that are due to be performed on or after January 7, 2025, and before October 15, 2025. Rev. Proc. 2018-58, 139 pages, consists primarily of lists of all actions eligible for postponement related to a federally declared disaster, such as 1031 exchange (see Section 6 and Section 17), S corporation elections, tax court and bankruptcy deadlines, etc.

Federal Penalties & Interest

I.R.C. § 7508A(a) grants the authority for the Secretary of Treasury & IRS to waive “the amount of any interest, penalty, additional amount, or addition to the tax for periods after such date” of declaration.

If an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

IRS Collections and Audits

Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.

Determining Eligible Taxpayers & Businesses

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area, in this case Los Angeles County, whether or not the taxpayer incurred any actual loss or damages related to the disaster. Therefore, taxpayers who’s individual and business tax returns have an L.A. County address do not need to contact the IRS to get this relief.

In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief but may have to contact the IRS to have their account flagged as eligible. Taxpayers qualifying for relief who live outside the disaster area may contact the IRS at 866-562-5227 to notify the IRS of the applicable issues.

Tax Practitioners within Los Angeles County Provide Relief to Taxpayers

Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief. For example, the taxpayer’s tax practitioner’s office, if located within the declared county, provides relief to the taxpayer. Taxpayers qualifying for relief who live outside the disaster area may contact the IRS at 866-562-5227 to notify the IRS of the applicable issues.

Contacting the IRS to Establish Relief for Out of Area Taxpayers

Several matters provide filing, paying, and penalty relief for out-of-area taxpayers including:

• Taxpayers working or volunteering for the disaster efforts
• Taxpayers visiting the area who are killed or injured
• Taxpayers whose tax practitioner is in the disaster area
• Individuals whose business in in the disaster area
• Businesses whose owners or operators reside in the disaster area
• Individuals or entities waiting on K-1s from entities in the disaster area
• Other applicable facts and circumstances related to the disaster area

NOTE: in many of these cases the taxpayer does not have to indicate they were personally affected by the disaster if one of the above conditions exist.

Our team has contacted the IRS at the federal disaster Tax Hotline number above, 1-866-562-5227. There is a very short wait time to speak to an IRS staff member and they are very experienced on these matters and quite helpful.

If the tax practitioner calls for the taxpayer or business, they either need Form 2848 on file or be prepared to fax the form to the IRS personnel on the call. And they may request that the SSN or EIN of the taxpayer client be “flagged” in the IRS computer as eligible for the disaster relief postponement. For the January 2025 Los Angeles County fire and wind disaster relief related to IR-2025-10 or CA-2025-01 be prepared to tell them the FEMA number DR-4856-DR listed at the top of this memo related to the disaster.

The IRS agent we spoke to indicated no further substantiation would be required, such as proving the taxpayer or the tax preparer’s office was struggling with specific fire or wind damage.

If the taxpayer calls on their own behalf to have their individual or business IRS account flagged for disaster relief, they should be prepared to give the applicable SSN or EIN for the taxpayer or business in Los Angeles County which provides them relief, and the county and zip code of the tax preparer’s office, or other affiliated business for which they are claiming related relief, and the FEMA number DR-4856-DR listed at the top of this notice. Note, they do not need to know the tax practitioner’s PTIN or EIN, if using that issue for relief but they need to know the tax practitioner’s zip code.

Additional Tax Relief for Federal Disasters

Business or individual taxpayers who are unable to meet the new expanded postponement deadline of October 15, 2025, due to specific circumstances related to this federally declared disaster may also request additional penalty abatement from the IRS for reasonable cause.

State of California Tax Relief Related to Los Angeles County Winds & Fires

California Franchise Tax Board Notice of Tax Filing Relief Postponement

California announced on January 11, 2025, that taxpayers in Los Angeles County will be granted a postponement to October 15, 2025, to file 2024 California tax returns and make any tax payments that would have been due January 7, 2025, through October 15, 2025. This aligns with the federal postponements granted for residents and businesses located in Los Angeles County and other taxpayers directly affected by the January 2025 California wildfires and wind damage. 

The California Franchise Tax Board postponement includes the following:

• Individuals whose tax returns and payments are normally due on April 15, 2025.
• Quarterly estimated tax payments normally due on January 15, April 15, June 15, and September 15, 2025.
• Business entities whose corporate or pass-through entity tax returns are normally due on March 15 and April 15, 2025.
• Pass-through entity (PTE) elective tax payments normally due on March 15 and June 15, 2025.
• Tax-exempt organization returns normally due on May 15, 2025.

California Unemployment Benefits for Individuals Affected by L.A. County Fires

California has waived the one-week waiting period for workers who qualify for regular unemployment benefits and are affected by the January 2025 Los Angeles County fires, including the Palisades, Eaton, Hurst, Woodley, and Lidia fires.

California Property Tax Payment Postponement & Property Tax Reassessment Relief

Governor Newsom’s January 16, 2025, executive order announced two new relief measures:

• Automatic Extension of Property Tax Payments for Designated Zip Codes:

Property owners in designated areas now have automatic extensions for property tax payments. Property taxes due April 10, 2025, and December 10, 2025, are now due April 10, 2026.

The executive order provides blanket relief of property tax deadlines for property owners in fifteen specific Los Angeles County ZIP codes: 90019, 90041, 90049, 90066, 90265, 90272, 90290, 90402, 91001, 91040, 91104, 91106, 91107, 93535, and 93536. Within these areas, property tax payment deadlines have been extended to April 10, 2026, with no penalties or interest accruing during this period. This extension applies automatically, requiring no application or special filing.

Comment: The April 10, 2026 deadline creates a big financial challenge: property owners will face three property tax installments due simultaneously, coinciding with federal and state tax returns and first quarter estimated tax payments due five days later. This concentration of tax bills will create cash flow problems for many taxpayers. Warn your clients taking advantage of the payment delay.

Tax planning. For business and rental property owners, the property tax delay will impact their 2025 deductions. Evaluate paying the 2024 property taxes December 2025 versus the value of using the money if the payments are delayed until April 2026. For individuals, the 2025 SALT limit is likely to make a 2025 property tax payments worthless. And there is some possibility that the SALT limit will be higher with the negotiations around TCJA’s expiration. Paying in 2026 is the best bet for the moment.

• Taxpayers May Apply to Reduce Property Taxes for Damaged/ Destroyed Property:

For property owners who had their property damaged or destroyed, the disaster reassessment program can provide immediate reductions to property tax assessments. While the postponement of payments to April 10, 2026, helps, it’s even better if the amounts due in 2026 can be reduced.

Comment.  Reassessment is available for more than federally declared disasters. If your client has a fire in their home or flood damage to their rental property, the client should be advised to contact their County Assessor for possible relief on property taxes. 

Example. Holly had a house fire. The house had little visible damage from the street, but asbestos clean up meant the house was unlivable for 11 months. The application for reassessment meant that improvements were reduced to zero until inspectors cleared the house for occupancy. It was an easy application process and getting a little thing done was good for Holly.

California Taxpayers Owing Past Due Taxes Prior to January 7, 2025

California Franchise Tax Board will stop accrual of interest during the time they delay mailing of bills and notices as a result of disasters declared by the President or the Governor of California.

At this time California has not indicated they will be suspending collection activity for amounts owing prior to January 7, 2025, however affected taxpayers unable to make their regularly schedule payments on existing payment plans may be eligible to have interest on the past due amounts suspended if they make a request.

California taxpayers must submit a request by submitting Form FTB3701, Request for Abatement of Interests, to stop accruing interest on taxes owed to California. The form may be submitted by fax to 1-916-843-6022, or email to FTBAdvocate@ftb.ca.gov or by mail to the following address:   

Executive and Advocate Services MS A381
Franchise Tax Board
PO Box 157
Sacramento CA 95741-0157

State of California Resources for Disasters

• https://www.ftb.ca.gov/file/business/deductions/disaster-loss.html#Extended-deadlines-to-file-pay-and-make-contributions
• https://www.gov.ca.gov/2025/01/11/california-provides-tax-relief-for-those-affected-by-los-angeles-wildfires 

California Employer Payroll Tax Filings and Payments

California Employment Development Department (EDD) 

(https://edd.ca.gov/en/About_EDD/Disaster_Related_Services)

Employers affected by the January 2025 Los Angeles County or the Ventura County fires may request up to a 60-day extension to file their state payroll tax reports or deposit payroll taxes. The request must be submitted within 60 days of the original due date of the payroll tax forms or payments and will eliminate any penalties and interest on payments made by the extended due date.

An employer’s payroll tax filing and paying 60-day extension request may be submitted by written request, there is no specific form available, or requested by phone at 1-888-745-3886.

Employers must provide the following:

• • The extension of time being requested.
  • The specific quarter for which the extension is requested.
  • Information regarding why the reports or payments could not be submitted in the original time frame.

Written requests for an EDD extension can be mailed to:

Employment Development Department
PO Box 826880
Sacramento, CA 94280-0001

California Sales Tax (California Department of Tax and Fee Administration: CDTFA)

Automatic Sales Tax Return Postponement for Los Angeles County: In response to the recent wildfires, the state has extended the January 31, 2025, sales and use tax filing deadline for Los Angeles County taxpayers until April 30, 2025.

Other CDTFA Reporting Administered Programs: Filing and Taxes Due

An extension of up to three months to file and pay taxes or fees is available for most other CDTFA administered programs, similar to the sales and use tax postponement.

This relief for other CDTFA programs is offered to any taxpayer directly affected by the Los Angeles and Ventura County Wind and Fire disasters, and who, as a result, cannot meet their filing and payment deadlines. The CDTFA may also extend the deadline for filings that were delayed by disruption of service from the United States Postal Service or private mail and freight companies. Businesses impacted by the L.A. County fires but with an address outside of L.A. County are also eligible to request a postponement.

CDTFA Relief Request of Interest and Penalties

Relief from interest and penalties may be provided to people who are unable to file their returns and pay taxes and fees when due. To request a filing or payment extension or relief from interest and penalties, please make a relief request directly with CDTFA.

Requests for relief may be made by completing and submitting CDTFA-735, Request for Relief from Penalty, Collection Cost Recovery Fee, and/or Interest form, or applying online through the taxpayer’s online CDTFA account.

To apply online, log in to the business’s CDTFA account and select “More” under “I want to” then select Submit a Relief Request. Occasionally, the option to submit a relief request does not pop up when searching for it, in which case the taxpayer should call the support number on the website to access the online request.

Note: References to Ventura County in EDD & CDTFA Relief

California EDD and CDTFA available extension requests also reference the County of Ventura. These references are related to a November 2024 fire in Ventura County, whose employers and businesses may still be eligible for payroll tax or sales tax postponements related to that fire. 

Preparing Tax Returns for L.A. County Fire Victims

Reporting Casualty Losses After TCJA

Generally, for tax years 2018 through 2025, individuals who incur losses of personal-use property from fire, storm, flood, shipwreck, or other casualty, or theft are not able to deduct the losses unless the loss is attributable to a federally declared disaster.

However, businesses, rentals, and other income producing property are eligible for applicable business tax deductions related to theft or damage of business property or assets whether or not attributable to a federally declared disaster.

Tax Note: Theft losses incurred by individuals in a transaction entered into for profit may still be deductible as are most Ponzi losses.

 The three types of loss related to federally declared disasters are:

• Federal Casualty Loss
• Disaster Loss
• Qualified Disaster Loss

All federally declared disasters are a disaster determined by the President of the United States to warrant assistance by the federal government under the Stafford Act. Federally declared disasters include: [1]

(a) a major disaster declaration (FEMA letters DR), or

(b) an emergency declaration (FEMA letters EM) under the Stafford Act.

 CHART: Types of Losses Related to Federally Declared Disasters

There are three types of losses related to federally declared disasters, and each has different requirements for deducting any applicable losses. [2]