Faster IRS relief now available after state declarations

September is natural preparedness month. When hurricanes, wildfires, floods or tornadoes hit, tax deadlines shouldn’t add stress to recovery. Yet under current rules, taxpayers often wait weeks or months for a federal disaster declaration to unlock IRS relief. That’s why new federal legislation and existing IRS provisions matter; they can offer breathing room when needed most.

Filing relief for Natural Disasters Act (H.R. 517)

Signed into law in July 2025, H.R. 517 empowers the Treasury Secretary, after consulting with FEMA and the state governor, to postpone federal tax deadlines as soon as a state declares a disaster, even before any federal declaration is issued.

Previously, the IRS could only delay deadlines after a federally declared disaster, sometimes leaving taxpayers in limbo if a state responded more quickly. With H.R. 517, relief can come sooner, giving taxpayers up to 120 days, double the former 60-day extension, to file or pay.

IRS existing relief for federally declared disasters

Even without new laws, the IRS routinely provides automatic relief when a major federal disaster is declared. This includes postponing filing and tax-payment deadlines for individuals, businesses and even relief workers in affected areas.
Affected taxpayers are typically identified by zip code, and relief is applied automatically. However, those outside the area needing filing or records assistance can self-identify by calling the IRS hotline (866-562-5227).

Claiming casualty losses and other disaster-related tax options

The IRS offers several tax benefits beyond deadline extensions:

• Casualty loss deductions: If your property or belongings are damaged or destroyed, you may deduct uninsured losses on your current or prior-year tax return by naming the disaster and its FEMA declaration prominently on Form 4684.
• Reconstructing records: Lost tax records? Use IRS transcript services via Forms 4506/4506-T, Request for Copy of Tax Return, to request expedited, fee-waived delivery for disaster-related needs.
• Special distributions for retirement accounts: If your home or income was affected, you may qualify for early distributions from IRAs or employer plans without the usual 10% penalty and may have repayment options under the Secure 2.0. Act of 2022 (up to 3 years).

Cohan rule for businesses after a disaster

Natural disasters often destroy property as well as receipts, invoices and records. That’s where the Cohan rule can apply. The rule comes from Cohan v. Commissioner (1930), when Broadway star George M. Cohan convinced the court to allow estimated deductions for business expenses he could not fully document.

The principle: if expenses clearly occurred, reasonable estimates are allowed.

Application

• Estimation of expenses: If exact documentation is missing, taxpayers may claim deductions for business expenses based on reasonable estimates. This is particularly useful for self-employed individuals or small businesses that lose records in a disaster.
• Reasonable basis required: Estimates must be grounded in fact. Industry averages, oral testimony, bank statements or partial documentation can support claims.

Limitations

• Not universally applicable: The Cohan rule does not apply to expenses subject to strict substantiation rules under IRC § 274(d), such as travel, meals and entertainment.
• Court discretion: Judges aren’t required to apply the rule; they may reject estimates if they lack credibility or evidence.

Why it matters post-disaster

Paper records may be gone for businesses and owners hit by a flood, fire or hurricane. The Cohan rule provides a lifeline, allowing taxpayers to claim legitimate deductions and keep cash flow moving while rebuilding.

Conclusion

When disaster strikes, rebuilding your life shouldn’t mean battling tax deadlines. Thanks to H.R. 517, relief can now arrive faster, sometimes immediately after a state declaration. Combined with IRS tools like casualty loss deductions, transcript recovery and the Cohan rule for reasonable expense estimates, tax relief is more accessible than ever.

For practitioners, the key is awareness. Your clients may not know these relief tools exist. By guiding them through extensions, deductions and even estimated business expenses, you can provide calm in the chaos of recovery.