Our Hearts Go Out to Southern California

As the wildfires continue to rage across Southern California, our hearts are heavy with concern for everyone affected by this devastating disaster. The loss of homes, businesses, and the natural beauty of the region is truly heartbreaking. We extend our deepest condolences to those who have suffered losses and are facing the uncertainty of what comes next.

In these challenging times, we are reminded of the incredible strength and resilience of our communities. We are also profoundly grateful for the tireless efforts of the emergency responders who are on the front lines, risking their lives to protect others. This includes not only our local heroes but also those who have traveled from other areas to lend their support. Your bravery and dedication are truly inspiring, and we cannot thank you enough for your selfless service.

Navigating State of Emergency Tax Relief for Southern California Wildfire-Affected Businesses

As Southern California grapples with the aftermath of the devastating wildfires in January 2025, businesses in the region are facing unprecedented challenges.

If you have a business that suffered losses due to the wildfires in January 2025, there are a few programs that may be able to assist you with the various business taxes.  Please understand, that as of the time of this writing, things continue to evolve and you may need give the agencies some time to update their websites.  Additionally, please keep yourself up to date as to any Presidential declared Federal Disaster Areas as this will be important for any Federal tax relief.

California Sales Tax

The CDTFA normally has a State of Emergency Tax Relief program, designed to alleviate some of the financial burdens for businesses directly impacted by these disasters.

The CDTFA provides several forms of relief to businesses affected by state-declared emergencies, such as the recent wildfires. These include:

• Extension of Filing Deadlines: Businesses can receive an extension of up to three months to file and pay taxes or fees. This extension applies to a wide range of programs administered by the CDTFA, including Sales and Use Tax, Motor Vehicle Fuel Tax, and more.
• Relief from Penalties and Interest: If a business is unable to file returns or pay taxes and fees on time due to the disaster, they may qualify for relief from penalties and interest. This can significantly ease the financial strain during recovery.
• Replacement of Lost Records: For businesses that have lost critical tax records due to the wildfires, the CDTFA offers free replacement copies. This service ensures that businesses can maintain compliance and manage their tax obligations effectively.

Please go to their website for more information.  https://www.cdtfa.ca.gov/services/state-of-emergency-tax-relief.htm

Payroll Taxes and Unemployment California EDD Disaster Related Services

The California Employment Development Department (EDD) offers disaster-related services to support businesses and employees affected by emergencies. These services include unemployment insurance benefits for workers who have lost their jobs due to the disaster, as well as job placement assistance and training services to help displaced workers find new employment opportunities.

The EDD also provides resources for employers to manage workforce reductions and navigate the complexities of disaster recovery. For more information on the EDD’s disaster-related services, visit their website at https://www.edd.ca.gov.

Immediate Financial Relief: Unemployment Insurance

One of the primary services provided by the EDD is Unemployment Insurance (UI), which offers partial wage replacement to workers who lose their jobs or experience reduced hours due to disasters. Notably, the usual one-week waiting period for UI benefits is waived under Governor’s Emergency Proclamations, allowing affected individuals to receive financial support more swiftly. This immediate relief can be crucial for those suddenly facing unemployment due to disaster-related disruptions.

Employer Support: Extensions and Assistance

For businesses impacted by disasters, the EDD provides critical support through extensions for filing and paying state payroll taxes. Employers can request up to a two-month extension, helping them manage financial obligations without incurring penalties or interest. This flexibility is vital for businesses striving to recover and maintain operations in the wake of a disaster.

Federal Disaster Unemployment Assistance

In cases where a Presidential Disaster Declaration is made, federal Disaster Unemployment Assistance (DUA) becomes available. This program extends temporary unemployment benefits to individuals who do not qualify for regular state UI benefits, such as self-employed individuals and farmworkers. DUA ensures that a broader range of affected individuals can access financial support, helping them navigate the economic challenges posed by disasters.

Additional Support Services

Beyond financial assistance, the EDD offers a variety of other services to aid recovery efforts. These include job search assistance through Local Assistance Centers, where EDD representatives provide resources and referrals to help individuals re-enter the workforce. Additionally, Disability Insurance (DI) and Paid Family Leave (PFL) benefits are available for those unable to work due to disaster-related injuries or those needing to care for affected family members.

Current State-Declared Disasters

The EDD continuously updates its list of state-declared disasters, ensuring that affected individuals and businesses are aware of the specific support available to them. For instance, recent disasters such as the Boyles Fire in Lake County and the Bridge Fire in Los Angeles and San Bernardino Counties have prompted the waiver of the UI waiting week and the provision of employer extensions.

California Income Taxes

California FTB Emergency Tax Relief

In addition to the CDTFA, the California Franchise Tax Board (FTB) also provides emergency tax relief for businesses and individuals affected by disasters. This relief may include extended deadlines for filing state income tax returns and paying taxes, as well as relief from penalties and interest.

The FTB works closely with the IRS to offer similar relief measures at the state level, ensuring that taxpayers have the support they need during difficult times. For more information on the FTB’s emergency tax relief options, visit their website at https://www.ftb.ca.gov.

Additional Information on Income Tax Disaster Loss Rules

Federal Disaster Loss Rules for 2025

When dealing with the aftermath of a disaster, the federal government offers several forms of relief:

• Federally Declared Disasters: The first step is to confirm if the area has been declared a federal disaster zone by the President. This declaration is essential for accessing various federal assistance programs.
• Casualty Loss Deductions: If your property was damaged or destroyed, you might be eligible to claim casualty losses on your federal tax return. These losses can be deducted in the year the disaster occurred or, alternatively, in the preceding year, which can expedite tax refunds.
• Filing and Documentation: To claim these deductions, you must file IRS Form 4684, detailing the nature and amount of the loss, along with any insurance reimbursements. It’s crucial to maintain thorough documentation, including photographs and repair estimates.
• Retirement Fund Access: Special provisions may allow penalty-free withdrawals from retirement accounts to cover disaster-related expenses, with extended repayment terms.

California State Laws and Relief Options for 2025

California provides additional support mechanisms for those affected by disasters:

• State Disaster Declarations: The Governor of California can declare a state of emergency, which may provide additional state-level assistance.
• Casualty Loss Deductions: California generally conforms to federal rules but allows for some state-specific deductions. Taxpayers should complete federal Form 4684 using California amounts to claim these deductions on their state returns. Notably, California does not require casualty losses to be disaster-related to be deductible.
• Net Operating Loss (NOL) Adjustments: For tax years beginning on or after January 1, 2024, and before January 1, 2027, NOL deductions are suspended except for taxpayers with net business income or modified AGI of less than $1 million. The carryover period for any NOL for which the deduction is suspended will be extended by one year for losses incurred in 2025.
• Property Tax Relief: Proposition 19 allows victims of wildfires to transfer the base year value of their primary residence to a replacement home anywhere in California, under certain conditions.

Resources and Assistance

Several resources are available to help those affected by the wildfires:

• Federal Emergency Management Agency (FEMA): Provides financial assistance for temporary housing, home repairs, and other disaster-related expenses. Visit fema.gov for more information.
• Small Business Administration (SBA): Offers low-interest disaster loans to businesses, homeowners, and renters. More details can be found at sba.gov.
• California Office of Emergency Services (Cal OES): Coordinates state-level disaster response and recovery efforts. Their website provides updates and resources specific to California.
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