The Internal Revenue Service (IRS) has announced that many payments made to individuals affected by the East Palestine train derailment in Ohio are not taxable. According to Notice 2024-46, posted on IRS.gov, the derailment on February 3, 2023, qualifies as “an event of a catastrophic nature.”
This designation means that various payments made by the common carrier operating the derailed train are considered “qualified disaster relief payments” and are excluded from gross income. However, individual taxpayers can only qualify for this exclusion if the expenses covered by these payments are not otherwise paid for by insurance or other reimbursement.
The common carrier issued Forms 1099-MISC to recipients of various payments, some of which are taxable and some of which are not due to their classification as qualified disaster relief payments. The tax-free qualified disaster relief payments include one-time $1,000 “inconvenience” payments, relocation expenses, expenses for replacing clothing and personal items, costs of repairing or rehabilitating homes and the surrounding environment, compensation to homeowners who sold their homes after the derailment, and medical expenses.
However, some payments are taxable. These include lost wages, access payments to property owners for allowing the common carrier to access the train track for remediation, and payments to businesses.
For those who have not yet filed their 2023 tax returns, qualified disaster relief payments do not need to be reported, even if reported on Form 1099-MISC. However, taxable payments must still be reported. Taxpayers filing Form 1040 electronically should attach a .pdf with the filename “EPTDR-East Palestine Train Derailment Relief” and state “East Palestine Train Derailment Relief.” For paper filings, this statement should be written at the top of Form 1040 and mailed to the address provided in the form instructions.
Taxpayers who have already filed their 2023 tax returns and reported their qualified disaster relief payments as taxable can amend their return by filing Form 1040-X to report the exclusion and claim any refund of taxes paid. The IRS advises e-filing the amended return to speed up processing. Instructions for electronic filing include attaching a .pdf with the filename “EPTDR-East Palestine Train Derailment Relief” and stating “East Palestine Train Derailment Relief.” For paper filings, write “East Palestine Train Derailment Relief” at the top of Form 1040-X and at the beginning of Part II, Explanation of Changes. Mail the completed form to the address provided in the form instructions.
For more detailed information, visit the East Palestine train derailment frequently asked questions page.
Eligible individuals or families can get free help preparing their tax returns at Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE) sites. To find the closest free tax help site, use the VITA Locator Tool or call 800-906-9887. To find an AARP Tax-Aide site, use the AARP Site Locator Tool or call 888-227-7669. Individuals or families with an adjusted gross income (AGI) of $79,000 or less in 2023 can use IRS Free File’s Guided Tax Software at no cost, with options available in English and Spanish.
Another option is Free File Fillable Forms, which are electronic federal tax forms for those comfortable filling out IRS tax forms. Additionally, the Department of Defense’s MilTax program offers free return preparation software and electronic filing for federal tax returns and up to three state income tax returns, available to all military members and some veterans without an income limit.
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