JOPLIN, Mo. ? Like a lot of business owners, Jeff Welborn knows this year is a whole new ball game when it comes to taxes.
Welborn owns Wireless Connections, one of hundreds of Joplin businesses damaged or destroyed in the May 22 tornado. He?s moved from 1431 S. Range Line to 420 N. Range Line, Suite 16.
But just as a lot of business owners spent the past several months getting back on their feet, they?ll spend part of the new one trying to figure out what it all means for tax purposes.
?In the past, we knew roughly where we were going to end up,? Welborn said. ?This year, there is a lot of uncertainty.?
Welborn said he is eager to meet with his accountant. With a senior graduating from high school in May and going to college, there are federal student aid forms to fill out and they require information from tax forms.
?We?re trying to get all of this pulled together,? Welborn said Friday. He said he would be meeting with his accountant next week.
?INVOLUNTARY CONVERSION?
Welborn and other business owners and homeowners have sustained what the Internal Revenue Service terms an ?involuntary conversion.?
Among the business owners in that situation are some accountants. Accountant Nick Myers? building at 20th Street and Delaware Avenue was destroyed in the tornado. His business has since reopened at 5031 S. Range Line, the former location of the Mesquite Heat restaurant.
?There was a tremendous outpouring of God?s mercy and favor through the folks who came to help out? after the tornado, Myers said.
The building housing accounting firm Hardy, Wrestler & Associates at 2430 Jackson Ave. also was destroyed. Accountant Jim Hardy said the business will return to the new, larger building at the same location on Saturday, Jan. 14. He spoke by phone Friday from his temporary office at 3121 McClelland Blvd.
Both said the tornado will make preparing taxes more complicated. For those who have an accountant or other professional tax preparer, they said clients should bring information about their property?s value before and after the tornado, any insurance payments they have received or information about insurance payments they are yet to receive.
Both also said they don?t yet have all the answers.
?There are a lot of unique situations, so we have to be careful not to take a general answer and utilize it for every situation,? Hardy said.
For those who lost a family member in the tornado, they said life insurance proceeds aren?t taxable income.
Donations tornado survivors received from churches, the Red Cross or other charities also aren?t taxable. Nor are grants from the Federal Emergency Management Agency.
Homeowners and business owners whose buildings were uninsured or under-insured should declare a casualty loss, which would be an itemized deduction.
Myers said business owners have the authority to use insurance proceeds for a similar building within two years. He said if there is a gain, it would be deferred until the business owner reinvests in the new building.
For the business owner who receives an insurance settlement but decides not to rebuild or relocate the business, the settlement must be declared as income.
The same is not usually the case for homeowners who receive an insurance settlement and don?t rebuild, or who receive a settlement greater than the amount paid for the house, if the house is the primary home.
Myers said if the amount of the gain is less than $250,000 for an individual or $500,000 for a married couple filing jointly, they would be able to file an exclusion on the tax return.
COMPLICATED
Hardy said Small Business Administration loans aren?t taxable income, because they have to be repaid. The interest on the loans may or may not be deductible, depending on the loan?s use.
Hardy said some business owners may have business interruption insurance, which provides for income when a business isn?t operating during a disaster. He said those payments are taxable income. An exception is not-for-profits that receive business interruption insurance payments.
?All of this could be far more complicated,? Hardy said. He said there may be divorce settlements involved, or a business may have more than one owner, for example.
Myers and Hardy encouraged people to bring up their questions and their situations with their accountant or tax preparer.
?Nobody knows the nitty-gritty of your tax situation better than you do,? Myers said. ?You know what you lost better than most folks do.?
Help
Accountant Nick Myers said he recommends IRS publication 547; publication 584, a workbook relating to disaster losses; and IRS form 4684, for those wanting to do more detailed research.
An IRS Disaster Assistance Hot Line, 1-866-562-5227, is available from 7 a.m. to 7 p.m. for taxpayers who have disaster-related tax questions.
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