I am a CPA in a Mineola, NY-based public accounting firm. I am imploring Congressman Peter King and other elected officials to bring to the attention of the Internal Revenue Service a problem that many constituents in the devastated areas of Long Island, Queens, Staten Island and lower Manhattan will be facing as they try to rebuild their lives as their homes were destroyed as a result of Hurricane Sandy.
These people have barely begun the process of filling out paperwork as they try to get FEMA funds to rebuild their homes. One individual that I spoke with had dealt with the process as a result of relatively minor damage from Hurricane Irene. It took almost six months for her to get FEMA funds then. Hurricane Sandy is a disaster of such epic proportions that she doesn’t expect to see the funds for a year.
While the current relief provided by the IRS is helpful if you have your retirement funds in a 401(k), 403(b) or similar vehicle with hardship loans, what happens to people whose retirement funds are mainly tied up in IRA’s?
At this point, although it appears that they won’t be subject to the early distribution penalty, they still must recognize their distributions as income. The current repayment term for an early distribution out of an IRA is only 60 days. Most of the people in the hardest hit areas will not likely have had an adjuster come to their homes by this point.
My solution is to have the IRS extend the term of the repayment of premature distributions from IRA’s related to Hurricane Sandy. This could be done as a non-interest bearing loan with a three to five year term or at least just an extension of the repayment term to at least over a year.
The people faced with this horrific life event shouldn’t be taxed in addition to the disruption they are already facing. I suggest that extending the repayment term for FEMA disaster areas be implemented. Let us not take away the retirement income of good, hard-working middle class citizens who just want to try to re-establish some normalcy in their lives.
Thank you so much for your consideration of this important issue.
Wendy Valentino, CPA/CFF, CFE
Cohen Greve & Company, CPAs
Mineola, New York