Do we need someone specialized in disaster tax to handle the tax reporting after a FEMA declared disaster? Cherry L asked 4 weeks ago
Do we need someone specialized in disaster tax to handle the tax reporting after a FEMA declared disaster?

We have a smoke-damaged house from the Eaton Fire that is currently in a legal dispute with our insurance company over remediation down to the studs. After watching UP’s webinar on taxation, it’s clear there are significant complexities involving multiple parties (insurance, SCE, etc.).

I know the standard advice is to “talk to your CPA.” However, many general CPAs are not specifically trained to handle disaster-related tax issues. Has anyone been successful with their tax reporting in a situation like this without hiring a CPA who specializes in disaster recovery?

2 Answers
John Trapani John Trapani Expert answered 4 weeks ago
0 Vote Up Vote Down

Hi Cherry,
These are complex transactions, and the tax rules are very complex. The IRS does not provide a form for reporting involuntary conversions.
An involuntary conversion is a tax term that generally refers to receiving insurance or other compensation after property is damaged, destroyed, or taken due to circumstances outside your control (such as a wildfire).
Most tax preparers do not have the experience needed to report these transactions. Experience over hundreds of cases, understanding the impacts of seemingly small details, and awareness of opportunities that may be available are important hallmarks to look for when selecting a qualified expert to assist in gathering, organizing, and presenting the data for inclusion in a tax return.
UP has partnered with financial experts to provide the following resources that you will find informative.
UP Tip of the Month: https://uphelp.org/taxing-tasks/
Youtube Video Taxing Matters
UP’s Claim Guidance Library (Making Housing and Financial Decisions)
Kindly, John Trapani

Mike Musson Mike Musson Expert answered 3 weeks ago
0 Vote Up Vote Down

Hi Cherry,

The question (“successful”) is not clear, so I will answer as best as I can. Your first inclination, and that of a less-experienced tax preparer, is to take the loss. However, this is not the right thing to do if you anticipate remediation, which would make you whole (e.g. reimburse your repairs).

So, talking to someone about a casualty loss is a good idea and don’t presume your tax preparer can’t come up to speed for you.

Mike Musson