IRS provides tax relief for East Palestine train disaster victims
The IRS has announced that many payments made to individuals affected by the East Palestine train derailment are tax-free. This guidance is intended to help those in Ohio, Pennsylvania, and West Virginia who were affected by this incident.
Covered disaster area
The disaster relief applies to Ohio, Pennsylvania, and West Virginia areas affected by the East Palestine train derailment on February 3, 2023.
Affected taxpayers
Individuals and businesses affected by the train disaster may be eligible for various tax relief measures to ensure that certain payments received do not increase their tax burden.
Tax-free payments
The IRS has clarified that the following payments are excluded from gross income and are, therefore, tax-free:
- one-time $1,000 "inconvenience" payments
- payments to cover moving expenses and the cost of replacing clothing and personal items
- funds provided for home repair or rehabilitation and environmental remediation
- compensation for homeowners who sold their homes as a result of the derailment
- payments for medical expenses incurred as a result of the incident
However, some payments remain taxable and should be included in gross income:
- payments for lost wages
- payments for property restoration
- payments to businesses for lost income or other damages
How to report
Taxpayers are not required to report qualified disaster payments on their tax returns, even if these payments are reported on Form 1099-MISC. However, taxable payments must still be reported.
For those who have not yet filed their 2023 tax return
- File electronically: Attach a PDF entitled "EPTDR-East Palestine Train Derailment Relief" to your Form 1040. The attachment should be labeled "East Palestine Train Derailment Relief.
- Paper filing: Write "East Palestine Train Derailment Relief" at the top of Form 1040 and mail it to the address listed in the form instructions.
For those who have already filed and reported the payments as taxable
- File an amended return: File Form 1040-X to claim a refund.
- File electronically: Attach a PDF entitled "EPTDR-East Palestine Train Derailment Relief" and indicate "East Palestine Train Derailment Relief" at the beginning of Part III, Explanation of Changes.
- Paper filing: Write "East Palestine Train Derailment Relief" at the top of Form 1040-X and at the beginning of Part II, Explanation of Changes. Mail it to the address on the form instructions.
Bottom line
Taxpayers affected by the East Palestine train disaster should thoroughly review their eligibility for the various relief measures offered by the IRS. Consultation with tax professionals can help ensure that they take full advantage of the tax relief options available.