The IRS released guidelines that help eligible homeowners who received federal reimbursement grants relating to Hurricane Katrina, Rita or Wilma. Specifically it outlines how recipients should amend their 2005 tax returns to avoid paying taxes on their grant money.

clipped from www.irs.gov

The notice explains how eligible taxpayers can amend prior-year returns to reduce the casualty loss deduction by the amount of the grant, and explains that taxpayers have one year to pay back any resulting tax due, penalty-free and interest-free. To qualify for this relief, these amended returns must be filed by July 30, 2009, and the entire resulting tax due paid by July 30, 2010, in most cases. The notice also provides special instructions for those taxpayers who have already filed an amended return.

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Click here to download these guidelines.

Go to TaxBrain.com to file you prior year taxes!