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Weathering Katrina-related losses

Accountants rolling up sleeves to help clients

This year, because even the simplest tax client in Mississippi may need a good CPA or tax professional, accountants across the state are logging long hours with very little sleep in preparation for the April 15 filing deadline.

“The IRS had to rise to the challenge of how to handle all of our local folks not having records,” said Jerry Favre, CPA, of Gulfport-based Alexander, Van Loon, Sloan, Levens, Favre, PLLC. “They’ve implemented new rules to help, but this year is extremely tough on not just the CPAs, but it’s very stressful to all individuals and business owners with losses. We’re having to get a lot more details from our clients than ever before, and with the loss of records, they’re struggling.”

Even though the IRS has extended the deadline to August 28 for three coastal counties to file tax returns, most people want and need to file now so they can claim their business losses and potentially get a refund or credit to help them immediately, said Favre.

“Many of my clients gather their records each year and drop them off, then I meet with them with the results,” he explained. “This year is vastly different. Everyone has a story to tell, and there are no drop offs. I’m meeting with clients as early as 5 a.m. before their business hours. We’ve developed a new tax planner that helps them with the information they will need to review their Katrina losses. Lately, I’m giving my clients lots of ‘homework’ that they have never had before, but it sure helps them to know exactly what is required of them. I enjoy taking the extra time with them. Anything that I can do to help them through these difficult times is a very good thing.”

Favre doesn’t enjoy giving them bad news. “Sometimes it’s devastating for individuals to learn that a financial loss doesn’t necessarily mean a tax loss,” he said. “In other cases, I spend many hours reviewing a client’s records and have great news for them. The IRS is allowing individuals to amend their 2004 tax return to claim their Katrina losses, and this has already helped many folks. Each business and individual has to be looked at very carefully to decide which is the best route for them.”

In Laurel, where Hurricane Katrina hovered bearing 100+ mile per hour winds, tax filers are also dealing with historic timber losses.

“Timber loss is a major concern to just about everyone living on rural property,” said Everette Boutwell, a CPA and a tax attorney with Boutwell & Company Ltd. in Laurel. “Timber losses don’t have any tax basis. If it’s land they’ve held for a long time and put seedlings on it, they have a zero tax base even though they could’ve had $100,000 in timber loss after the storm. They could get not one dime’s deduction. People really are upset about that.”

The extra work is taking a toll on accountants, said Boutwell.

“It takes considerably more time to prepare returns,” he said. “And because people are having to reconstruct records and some are waiting on insurance settlements, an awful lot of people will be filing extensions, so the heavy workload won’t ease after April 15.”

Preparing taxes is more tedious even for taxpayers who didn’t suffer obvious storm damage, pointed out Paul Breazeale, CPA, a principal with Breazeale, Saunders & O’Neil, Ltd., in Jackson.

“I’ll be interviewing a client and he’ll say, ‘well, I didn’t really have any losses’ and I’ll say, ‘what about the food in your refrigerator and freezer?’ and he’ll say ‘Oh, I forgot about that.’ I don’t think we’ve seen a single tax return that didn’t have some kind of a loss from the hurricane,” he said.

Breazeale has noticed a pleasant surprise this tax season.

“People have been even more generous,” he said. “The level of contributions is up significantly from prior years. In 2005, modest givers gave a lot of money to charity, the American Red Cross, the church, to all kinds of relief efforts. That’s a pervasive thing.”

Contact MBJ contributing writer Lynne W. Jeter at Lynne.Jeter@gmail.com.

About Lynne W. Jeter

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