The year 2020 will be remembered for all the wrong reasons. Though COVID-19 reigned supreme as the number one issue, there were many devastating natural disasters that occurred during the year as well. There was the record setting Atlantic Hurricane season, wildfires (especially in California), floods, tornadoes, blizzards, and record heat just to name a few.
In the aftermath of a natural disaster, dealing with loss becomes a hurdle to clear. Soon disaster victims realize, as they replace damaged and lost possessions, that some or all their financial records disappeared with the disaster as well. Both people and businesses discover that financial data on computers, documents, checks, receipts, as well as bank and credit card statements were destroyed.
There are going to be many tax related questions: What are the deadlines? Have they been extended? How much loss can be claimed on the tax return? These, along with many other questions will need to be answered. Even though there has been a disaster, taxpayers must still comply with Federal and state income tax filings and payment deadlines.
A big question asked may be, “How does a taxpayer identify, recreate and recover tax documents after the disaster?” Reconstructing these records after a disaster is important for several reasons. The records can be used for insurance claims, prove disaster related losses, and help in obtaining recovery assistance like loans and grants.
- Secure key documents and make copies.
Place original documents, such as driver’s licenses, tax returns, birth certificates, deeds, insurance policies, and financial records, in a secure place. Make duplicates of these documents and keep them with a trusted person outside the area. You could also scan the documents for backup storage either on the cloud or a flash drive. - Document valuables
Compile a room-by-room analysis of belongings. Consider taking pictures or video to document real and personal inventory items. Consider storing this information in a bank safe deposit box or with a trusted family member or friend that does not live in the same area. - Obtain a P.O. Box address.
Once a disaster strikes in your area, you may not be able to pick up mail from your location. A P.O. Box can also be used as a permanent mailing address. You can also use a P.O. Box to have documents you may need mailed to you after the disaster passes. - Change Passwords
You may need to change passwords after a disaster happens because you forgot them, or out of an abundance of caution. There is a possibility that a fraudster came across your documents left behind by the disaster and will try to use it. - Request credit reports
Changing passwords is one way to minimize your risk of additional problems after a disaster. To ensure that no one has stolen your identity, request regular credit reports during the upcoming year. - Obtain tax transcripts from the IRS
There are several transcripts available from the IRS. Either you or your accountant can request these to prove prior and current year income. This information can then be sent to the requestor either online or by mail. - Request prior year tax return
If you were unable to save a copy of the prior year tax return, you may request a copy of that return. This can assist in providing a clear picture of whom you may need to contact to obtain records to prepare your current year return.
Disasters are a time when cases of identity theft are high. Fraudsters want to take advantage of both the victims and those that would like to help them. To learn of ways to minimize your risk of identity theft, read our article, “Are You at Risk for Identity Theft?” Some of these suggestions for disaster preparedness can be done now. You don’t have to wait for the Big One to hit.
AKDF will be with you all the way during this difficult time. We can offer guidance on recreating tax documentation and assistance in calculating any casualty losses from the disaster. If you need assistance in this area or other accounting matters, please contact our office at (210) 829-1300.