Preparing Your Tax Return(s) and Information Returns

Reporting Disaster Losses

A Presidentially declared disaster is a disaster that occurred in an area declared by the President to be eligible for federal assistance under the Disaster Relief and Emergency Assistance Act. If you have a casualty loss from a disaster that occurred in a Presidentially declared disaster area, you can choose to deduct that loss on your return or amended return for the tax year immediately preceding the tax year in which the disaster happened.

Loss of Inventory: You can claim a casualty or theft loss of inventory, including items you hold for sale to customers, through the increase in cost of goods sold by properly reporting your opening and closing inventories. Do not claim this loss again as a casualty or theft loss. If you take the loss through the increase in the cost of goods sold, include any insurance or other reimbursement you receive for the loss in gross income.

Important References:

Publication 547     Casualties, disasters, and Thefts (Business and Non- Business) Casualties and Thefts
Form 4684             Casualties and Thefts

Web Link:

www.fema.gov        (Federal Management Agency, FEMA)