Upon the completion of the physical devastation caused by the fires in Southern California, the victims will have to deal with an exasperating government bureaucracy as they attempt to recover.
The perplexing tax legislation that the survivors of the 2018 Camp Fire in Paradise have been coping with for years and that IRS officials were just recently able to fix is an example of that type of red tape.
On November 8, 2018, at around 7:15 a.m., Kim Hurst was just getting started at work when she noticed smoke in the distance, changing from white to red to black, and rushing towards Paradise.
“We left by 8:45 and we were told by our neighbor that by 9, our house was burnt,” she stated.
Hurst had to endure a terrifying journey out of town, just like everyone else, with the smoke and flames transforming the bright dawn into the darkest night. Her home and almost all they owned were burned to ashes, but her entire family lived. Before long, the uncertainty began to creep in.
“I was confident that I could build us a house with beds. However, I wasn’t sure if I would have enough money to buy us chairs, a couch, silverware, or anything else,” Hurst recalled with tears in her eyes.
The town was largely destroyed. A $10 billion trust fund was created to assist the victims in rebuilding their Paradise homes after PG&E was deemed to be responsible for the fire.
“Then we found out that we had pay the taxes on it,” replied Hurst. And that hurt a lot because it felt like someone else had taken something else away from us. And that was our only remaining option.
A sizable amount of the award is given directly to the lawyers representing the parties in any settlement. However, the Trump administration eliminated legal costs as a tax-exempt expense in 2018—the same year as the Camp Fire—so victims of wildfires were forced to pay taxes on money they weren’t even receiving.
According to John Knecht, a qualified tax preparer and proprietor of Sharrett Bookkeeping in Paradise, “these 80-year-old people who haven’t paid taxes in ten years are now having to pay 5, 10, 15, 20,000 dollars on a settlement of 50,000 dollars.” “We have others that paid taxes on attorney fees of $300,000, which was completely ridiculous because the attorneys are paying taxes on this income.”
Knecht’s assistance in navigating the intricate system has made him somewhat of a hero to his neighbors. This is because a bill that ended double taxation was signed into law by President Biden last month. More than that, the new law provides a return to fire victims who paid taxes as a result of the settlement.
“We have about 3,500 amended tax returns that we’ll be doing for our clients that will recover about $28-$30 million back into their pockets,” Knecht said. “They paid taxes on about $110 million from the fire victim’s trust that they should not have had to pay.”
The IRS has not yet established a system for putting the new law into effect because it is really closed in January in order to get ready for the next tax season. Knecht, however, stated that he anticipates that starting in July, the initial reimbursements to wildfire victims will be made.
“Now these people can finish planning what they want to do,” he stated. “It’s true that some of them put off rebuilding because they were unsure of how much they would receive. They will therefore be able to go on to the next phase of their lives now that they are aware that this money will be returned. And perhaps this will put an end to this.
Although it could be more difficult to find closure, the money will be greatly appreciated.
When Kim said, “We’ll always feel this,” We all experience the agony, however some people are more affected than others. However, you must continue, don’t you?
Those victims haven’t even considered it as the recent fires in Southern California continue to burn. However, people will eventually comprehend what the Paradise survivors have endured for the past six years.
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Eliot Pierce is a dedicated writer for ChiefsFocus.com, covering local crime and finance news. With a keen eye for detail and a passion for storytelling, Eliot aims to provide his readers with clear and insightful analysis, helping them navigate the complexities of their financial lives while staying informed about important local events. His commitment to delivering accurate and engaging content makes him a valuable resource for the community.