On September 28, 2017, we released a blog regarding the disaster relief provided by the IRS in the wake of Hurricanes Harvey, Irma, and Maria, which you can find here. In that blog, we relayed that while the IRS was providing disaster relief in the form of extended filing deadlines, our contacts at the IRS indicated that the IRS was interpreting the extension narrowly with respect to certain IRS Form 8886 filers—i.e., those claiming deductions in 2010 to 2015 tax years that remained open to assessment as of Dec. 23, 2016—such that the Oct. 2, 2017 deadline to file IRS Form 8886 was not extended for taxpayers affected by Hurricanes Harvey, Irma, and Maria.
Comparatively, taxpayers claiming deductions in the 2016 tax year pursuant to listed and other reportable transactions had their Oct. 15, 2017 (assuming fully extended 2016 return) filing deadline for IRS Forms 8886 extended until January 31, 2017.
In the prior blog, we also expressed our belief that the IRS was misinterpreting the Code and regulation providing the disaster relief, which instructs that the deadline is extended for any “act required …by the Secretary.” Code §§ 7508A(a)(1); 7508(a)(1)(K). Filing IRS Form 8886 by Oct. 2, 2017 is an act required by the Secretary. See Notice 2017-10, as revised by Notice 2017-29.
Well good news! It appears that the IRS has somewhat had a change of heart, because on Friday September 29, 2017 (just one “government day” before the looming Monday Oct. 2, 2017 deadline) the IRS released IRS Notice 2017-58, which extends the Oct. 2, 2017 deadline to file IRS Form 8886 for affected taxpayers that claimed deductions in 2010 to 2015 tax years that remained open to assessment as of Dec. 23, 2016. The deadline for such taxpayers to file IRS Form 8886 is now Oct. 31, 2017.
It is unclear what caused the IRS to change its position. Maybe it got a lot of push back taking such a narrow (if not unreasonable) interpretation when taxpayers were still dealing with the devastation caused by these hurricanes, and that pressure was the conduit for a change of heart. However, it is interesting that the IRS only extended the deadline until Oct 31, 2017 and not the January 31, 2018 provided to other affected taxpayers.
“Affected taxpayers” includes taxpayers that (1) have a principal residence or principal place of business located in a Hurricane Harvey, Hurricane Irma, or Hurricane Maria covered disaster area, or (2) have records necessary to meet the Form 8886 disclosure obligation maintained in such a covered disaster area. Treas. Reg. § 301.7508A-1(d)(1).
Taxpayers who believe they are entitled to this extended due date should mark “Hurricane Harvey”, “Hurricane Irma”, or “Hurricane Maria” on the top of their IRS Forms 8886. See IRS Notice 2017-58.