ByRobert W. Wood,
Senior Contributor.
If you received a lawsuit recovery in 2020 or 2021 in connection with a federally declared wildfire and paid taxes on your recovery, you may be entitled to a tax refund if you act quickly. In late 2024, Congress enacted legislation to make many wildfire legal settlements free of federal taxes if they were received in 2020 through 2025 in connection with a federally declared wildfire disaster. Payments received in 2020 and 2021 require particular attention, since amended tax returns for these years must be filed by December 12, 2025. If you qualify and have not yet filed, you should contact your tax preparer as soon as possible. Notably, this deadline is unrelated to the IRS and California tax filing extensions for wildfire victims announced early in 2025.
The imminent December 12, 2025 deadline is only for filing amended 2020 and 2021 returns. For the other years covered by the new federal exclusion, your deadline for amending your returns is the usual deadline for filing amended returns. That is, you have three years from the date you filed that original tax return (or from the standard tax filing deadline for that year, usually April 15, if you filed your returns early) to file an amended return for that year to claim a refund.
