The American Institute of CPAs (AICPA) has expressed strong support for the Tax Fairness for Disaster Victims Act, introduced by Representative Timothy Kennedy.
Known as HR 3975, the legislation aims to provide permanent relief for individuals affected by federally declared disasters by allowing them to use the prior year’s earned income for the Earned Income Tax Credit (EITC).
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The bill’s lookback rule has been included in several legislative packages in recent years but has not been made a permanent form of disaster relief.
The AICPA said it has long advocated for the permanent establishment of such measures to aid those impacted by disasters.
It explained that the EITC is a refundable tax credit for taxpayers with earned income below a certain threshold, which varies based on filing status and number of children.
Natural disasters can disrupt work and reduce earned income, hindering taxpayers from claiming the EITC.
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By GlobalDataAICPA senior manager for tax policy and advocacy Daniel Hauffe said: “When natural disasters devastate local economies and impact taxpayers’ ability to earn income, taxpayers should not lose eligibility for tax credits that would otherwise be available to them if not for their loss of income.
“The AICPA supports this bill because it would make permanent a provision that has been in numerous disaster tax relief legislative packages and, therefore, would offer clarity and certainty to taxpayers and tax practitioners.”
A recent AICPA survey found that 37% of Americans have experienced fraudulent activities after being affected by natural disasters.
The types of fraud include identity theft (14%), government assistance fraud (11%) and loan scams (11%).
The survey also highlighted that residents in the north-east and south (both at 40%) are more susceptible to fraud compared to those in the Midwest (31%).
In a separate survey, the AICPA emphasised the need for enhanced tax relief measures for disaster victims.
Additionally, the survey indicated a strong public preference for extending Internal Revenue Service tax relief measures beyond initial emergency declarations.
More than a third (35%) of respondents valued extended tax filing and payment relief periods post-disaster.
