Financial Relief for Employees & Businesses Impacted by the LA Wildfires

The recent devastating wildfires in Los Angeles have impacted countless lives, including employees, their families, and local communities. In response, employers can provide meaningful support to affected employees through qualified disaster relief payments, which offer tax-advantaged financial assistance. Additionally, the IRS has announced filing and payment extensions, giving impacted taxpayers extra time to meet their tax obligations.

Tax-Free Financial Assistance for Employees

Under Section 139 of the Internal Revenue Code, employers can provide qualified disaster relief payments to assist employees with necessary expenses resulting from the wildfires. These payments are not considered taxable income and are exempt from self-employment and employment taxes (Social Security, Medicare, and federal unemployment taxes) making them an effective way to offer immediate relief.

What Can Qualified Disaster Relief Payments Cover?

Employers can assist employees with reasonable and necessary personal, family, or living expenses not reimbursed by insurance. This can include costs such as:

  • Temporary housing and relocation costs
  • Medical and mental health expenses
  • Transportation and evacuation costs

Best Practices for Employers

To ensure compliance and fairness, employers should:

  • Label payments as “Qualified Disaster Relief Payments” to prevent them from being misclassified as wages.
  • Establish a transparent and equitable process for identifying and assisting affected employees.
  • Communicate that the payments are intended only for unreimbursed expenses to avoid duplication with insurance claims or other reimbursements.

Tax Filing and Payment Extensions for Affected Businesses and Individuals

Recognizing the significant impact of the wildfires, the IRS has granted automatic tax relief to those in designated disaster areas. Individuals and businesses now have until October 15, 2025, to file tax returns and make payments originally due between January 7, 2025, and October 15, 2025. This extended deadline applies to:

  • Individual income tax returns and payments originally due on April 15, 2025.
  • 2024 IRA and HSA contributions for eligible taxpayers.
  • Quarterly estimated tax payments due on January 15, April 15, June 16, and September 15, 2025.
  • Quarterly payroll and excise tax returns are due on January 31, April 30, and July 31, 2025.
  • Calendar-year business, partnership, and nonprofit tax filings commonly due in March, April, and May 2025.

The IRS automatically applies filing and penalty relief to taxpayers with an IRS address of record in the disaster area—no action is required to claim this benefit.

How We Can Help

At Calibre CPA Group, we understand the challenges that disasters bring to individuals and businesses alike. Our team can assist employers in structuring and documenting disaster relief payments, ensuring compliance with IRS regulations, and providing tailored advice on extending meaningful support to employees in need.

By following best practices and leveraging the tax advantages of qualified disaster relief payments, businesses can provide immediate and impactful assistance to their teams during these challenging times. Contact our team today to learn more about how we can support your disaster relief efforts.

Article Prepared By:
Scott Hallberg | Senior Tax Director

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