Tax Alert – Estimated Tax Payment Deferrals in the Aftermath of Hurricane Debby

In the aftermath of Hurricane Debby’s impacts on the Southeastern United States, the Internal Revenue Service (IRS) has provided for targeted relief to affected taxpayers in the region.  The relief, published in IR-2024-205, is applicable to taxpayers who live in or operate a business in any of the following areas:

• All of South Carolina

• Portions of Florida on a county-by-county basis

• Portions of Georgia on a county-by-county basis

• Portions of North Carolina on a county-by-county basis

Pursuant to this relief, any quarterly federal estimated income tax payments that would otherwise be due on September 16, 2024 (calendar Q3 2024 payments) or January 15, 2025 (calendar Q4 2024 payments), will be considered timely if paid on or before February 3, 2025.

Taxpayers facing substantial federal estimated income tax payments in September 2024 or January 2025 may benefit from additional time to retain the cash due for federal estimated income taxes until February 3, 2025.

Example:

A taxpayer living in South Carolina is required to make quarterly federal estimated income tax payments of $400,000 for 2024.  The taxpayer has already paid in $100,000 for Q1 (due April 15, 2024) and $100,000 for Q2 (due June 15, 2024).  

In lieu of the planned federal estimated income tax payments of $100,000 for Q3 and $100,000 for Q4 on September 16, 2024, and January 15, 2025, respectively, the taxpayer may now make the $200,000 of remaining 2024 federal estimated income tax payments on February 3, 2025.

In addition, the IRS has extended the filing deadline for any 2023 federal income tax returns with a valid extension that would otherwise be due before February 3, 2025.  Please note, however, that this filing extension for 2023 federal income tax returns does not apply to any 2023 federal income tax payments (because payments were due prior to the date of Hurricane Debby).

Lastly, affected taxpayers with quarterly payroll and federal excise tax returns typically due on October 31, 2024, and January 31, 2025, have an automatic extended due date of February 3, 2025.

While the filing extensions above may prove useful to some taxpayers whose operations were affected by Hurricane Debby, all taxpayers in an eligible area should closely review their ability to defer federal estimated income tax payments typically due in the coming months to February 3, 2025, thus improving short-term cash flows.

South Carolina Tax Relief

The South Carolina Department of Revenue (SCDOR) has aligned itself with the taxpayer relief that the IRS has granted in response to Hurricane Debby.  Specifically, taxpayers living in or operating a business in South Carolina are automatically granted an extended filing deadline on certain SC income tax or withholding tax returns.

However, of key importance for cash flow management, affected South Carolina taxpayers are also permitted to defer the payment of quarterly South Carolina estimated income tax payments originally due on September 16, 2024, December 16, 2024, or January 15, 2025, to the new payment due date of February 3, 2025.

The SCDOR relief does not apply to other types of taxes also under the SCDOR’s purview, such as South Carolina sales and use taxes and property tax returns filed with the SCDOR, among others.

Georgia Tax Relief

The Georgia Department of Revenue has adopted much of the same IRS relief provided in response to Hurricane Debby.  Certain taxpayers located in specific counties within Georgia are automatically granted an extended filing deadline on certain Georgia income tax or withholding tax returns.

Like with South Carolina, affected Georgia taxpayers are able to defer the payment of quarterly Georgia estimated income tax payments originally due on September 16, 2024, or January 16, 2025, to the new payment due date of February 3, 2025.

Unlike with South Carolina, the Georgia tax relief does include some other taxes, such as Georgia sales and use tax.

North Carolina Tax Relief

The North Carolina Department of Revenue (NCDOR) has similarly adopted some of the IRS relief given to affected taxpayers, but with key caveats.  For residents of and businesses operating within a specific group of North Carolina counties, as well as limited other individuals, the NCDOR will remove certain penalties for any tax returns or tax payments due to North Carolina between August 5, 2024, and February 3, 2025.  Similar to the IRS and some other states, the NDCOR relief does not apply to North Carolina state income taxes due prior to the relief period, such as those related to extended 2023 income tax returns.

Importantly, the NCDOR is clear that it does not have the authority to waive interest charges for quarterly North Carolina estimated state income taxes.  As such, Q3 and Q4 estimated state income taxes for North Carolina are still due on the statutory due dates, and the cash tax deferral afforded to taxpayers at the federal level and within some other Southeastern states is not available.

Questions

If you have questions regarding the application of federal or state tax relief related to Hurricane Debby, please consult your Elliott Davis tax adviser.

The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.