What you need to know about the Disaster Related Extension of Deadlines Act

The president has signed the Disaster Related Extension of Deadlines Act (H.R. 1491) into law, a bipartisan measure designed to provide significant administrative relief to Americans recovering from natural disasters. Introduced by Representatives Greg Murphy and Jimmy Panetta, the legislation ensures that taxpayers can focus on rebuilding their lives rather than navigating complex IRS requirements during times of crisis.

Aligning refund windows with disaster timelines

One of the primary reforms introduced by this law addresses a long-standing discrepancy in how tax deadlines are managed during federally declared disasters. While the IRS frequently postpones filing and payment deadlines for disaster victims, the three-year window for taxpayers to claim credits or refunds for previous years was not always similarly extended.

This misalignment often left disaster victims with less time to claim their funds than taxpayers who requested standard filing postponements. The new law corrects this by:

• Conforming the deadline for claiming prior-year refunds or credits with the extended filing period granted to disaster-impacted taxpayers.
• Extending the three-year window for receiving a refund to match any disaster-based filing deadline extension.
• Ensuring that automatic IRS payment deadlines are adjusted to match these disaster-related extensions.

Stopping premature IRS demand notices

The legislation also prohibits the IRS from mailing premature notices demanding payment to individuals living in disaster areas where payment deadlines have already been postponed. This reform addresses a significant issue observed in 2023, when the IRS incorrectly sent more than 1 million notices to taxpayers in California who were recovering from natural disasters. Those notices incorrectly informed individuals they had only 60 days to pay federal taxes to avoid penalties, despite their disaster-related extensions.

By ending this practice, the law aims to prevent unnecessary stress and confusion for families already facing “unimaginable challenges.” Ways and Means Committee Chairman Jason Smith noted that the reform allows Americans to remain focused on repairing damage to their homes and lives rather than responding to erroneous IRS demands.

A unanimous bipartisan effort

The Disaster Related Extension of Deadlines Act received broad, unanimous support throughout the legislative process. The policy was previously highlighted as a top legislative recommendation by the National Taxpayer Advocate.

Key milestones in the Bill’s journey included:

• Committee Approval: The bill passed out of the Ways and Means Committee unanimously in February.
• House Vote: The House of Representatives passed the bill with a unanimous vote.
• Final Enactment: The president signed the bill to bring what Representative Murphy described as “meaningful reform” and “real relief” to districts across the country.

Source: US House Committee on Ways and Means