Tax

Government giving tax relief, loans after Irene

AP News
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Posted: Sep 02, 2011 1:28 PM
Government giving tax relief, loans after Irene

Hurricane Irene hit many small businesses as it moved up the East Coast last weekend. Owners typically look to the federal government for help after a disaster.

Parts of North Carolina, New Jersey, New York, Vermont and Puerto Rico have already been declared federal disaster areas. Businesses in those areas are eligible for tax relief from the IRS and loans from the Small Business Administration.

If more places hit by Irene are declared disaster areas, businesses located there will also be able to receive federal help.

TAX RELIEF

The IRS has postponed tax filing and payment deadlines for taxpayers including businesses in declared federal disaster areas. That means that corporations that got extensions until Sept. 15 of the March 15 deadline to file their 2010 returns now have until Oct. 31 to get the returns in. Business owners who are sole proprietors or partners and who got an extension of this year's April 18 filing deadline also have until Oct. 31. Their returns had been due Oct. 17. Also postponed until Oct. 31: The Sept. 15 due date for quarterly estimated tax payments.

The government regularly extends filing deadlines for businesses and other taxpayers in federally declared disaster areas. After tornadoes hit North Carolina on April 16, the IRS gave affected taxpayers until June 30 to file their returns and pay their estimated taxes.

The IRS also is giving additional relief to corporations and partnerships that got extensions of the March 15 filing deadline. If their preparers were in an area that was under an evacuation order or a severe weather warning, these businesses have an extra week, until Sept. 22, to file their returns. The preparers did not have to be located in a disaster area for the corporation to get the extra time. And these businesses get the extra time regardless of where they are located.

Also, businesses that need copies of past tax returns -- for example, to apply for disaster loans -- won't have to pay for those copies if they're located in a disaster area.

Business owners can get more information at the IRS website, www.irs.gov.

DISASTER LOANS

The SBA makes two kinds of disaster loans. One is the physical disaster loan, which provides money to replace or repair damaged property owned by a business that is located in a federal disaster area. The loans are for companies of all sizes that don't have insurance or who have suffered losses beyond what their insurance policy will pay. The loans are limited to the amount of the damage, up to a maximum of $2 million.

However, if the repairs include steps to protect the property from damage in a future disaster, the business may be able to borrow more. For example, if you install storm shutters on your building.

The second type of loan is the economic injury disaster loan, or EIDL. These loans are intended to help small businesses pay fixed operating expenses such as salaries, rent, interest on mortgages and lease payments on equipment. They don't, however, replace lost sales or profits.

Businesses can get these loans even if they didn't suffer physical damage. But they have to be located within the disaster area. For example, after the Gulf oil spill last year, the fishing industry and companies that supplied it were eligible for EIDLs. Most didn't suffer physical damage.

Companies can borrow up to $2 million for EIDLs. If they qualify for both types of disaster loans, they are still limited to $2 million.

You can get disaster loans even if you can't get credit elsewhere. The SBA, however, will be the one to determine whether or not you're able to get credit.

For physical disaster loans, the interest rate will not be more than 4 percent if you cannot get credit elsewhere. If you are able to get credit elsewhere, the SBA will not charge you more than 8 percent. For EIDLs, the interest rate cannot be more than 4 percent. The term of a disaster loan generally cannot be more than 30 years. However, the term will be determined by your ability to repay the loan.

More information is available about the loans at the SBA website, www.sba.gov.

OTHER HELP

Businesses may also be able to get financial help from their state governments, whether or not they're in federal disaster areas. States like New York and Vermont have already said they will help companies that suffered damage.