The statements made in these blog postings do not qualify as tax advice. These statements are general comments based on general questions. Your specific facts will impact the application of the law to your situation.

The basic facts of modern life include the fact that almost everything we do or experience involves a tax or a tax reporting requirement. The destruction of property in a federally declared disaster is one of those experiences. Unlike the usual role of taxes in our everyday life where taxes are designed to pick our pockets, when a disaster strikes, the tax code is designed to keep money in your pockets to use to recover from the loss event.

In cases of under-insurance or no insurance the tax code may put money in your pockets through a casualty loss deduction. In cases where insurance is more than your cost basis, the tax code lays out a plan to use the proceeds to rebuild your life, including excluding some proceeds from any possible taxes and deferral of other gains from taxation indefinitely.

These situations pose a daunting process of reporting that necessitates the use of an experienced tax professional with years of experience in preparing the unique reports that the tax code calls for that allows you to claim the benefits that you are entitled to claim. For most cases, the reporting requirements are so complex that the IRS cannot provide a form to complete the reporting. A tax professional without the experience of providing these reporting services is faced with deciphering the requirements and then designing a form that the IRS could not design and accomplish it all in time to file your tax return.

An experienced CPA with years of experience, John Trapani has successfully prepared these disclosure reports since 1994.

Wondering is your insurance payout is taxable? Learn more about insurance payouts for a disaster here.