After the recent destruction that Hurricane Harvey has caused to Texas, the IRS has released additional relief to assist taxpayers affected by the storm. This assistant will allow taxpayers in and outside of the disaster areas to provide relief for themselves and those in need. The relief is focused around distributions and loans being made from a retirement plan with regards to a “Hardship Distribution.” . Frequently the procedures to take a distribution or a loan against a retirement account are relatively strict. The IRS, however, is disregarding these proceedings for distribution beginning on August 23rd, 2017 through January 31st, 2018 for those affected by Harvey and individuals related to those affected by the Hurricane. This means that you do not need to be in a FEMA classified disaster area to assist a qualified person (mom, dad, son, daughter, grandparents) by taking a hardship distribution from your plan or a loan to support a family member.
It is critical to note that the IRS tax treatment on loans and distributions remains unchanged. Normally loan proceeds are tax-free if repaid within five years, and hardship distributions are taxable and subject to a 10% early-withdrawal tax. Please consult with a tax advisor or plan administrator before taking a distribution.
On another note, many Americans are providing contributions to a charity. This is an excellent way to provide assistance, and if you itemize your deductions, then you can claim the contribution on your 2017 tax return. The IRS has made mention of being aware of scams and criminals that are trying to profit from the Hurricane. Be careful with emails that you receive as they could bring you to a website that appears to be affiliated with a charity, and the site could steal any credentials that you provide.
Below are some useful links for further information.