Tax

Are your financial and tax records safeguarded against a hurricane?
 
Published Friday, July 10, 2009 7:00 am

by Robert H. Sacks, CPA



Safeguard your documents and records

 

The Internal Revenue Service is encouraging taxpayers to safeguard your financial and tax documents before a hurricane strikes. Many records are very difficult to replace or duplicate; keeping them protected from the elements, accessible, and in a safe place is an essential part of smart recordkeeping. Protecting your information is one way to protect yourself in everday life, but also when faced with a worst-case scenario. There are several easy steps you can take to safeguard your financial, tax and personal records, even if you do not live in a hurricane-prone area.

Go paperless
In today's evolving high-tech world, maintaining records electronically is simple, quick and essentially disaster-proof. If you don't receive your bank statements, investment account summaries, credit card statements or other financial documents via email, you can turn them into electronic documents by scanning them. Tax returns, receipts and other records may also be scanned.

Keeping an electronic copy of your important financial documents on your hard drive is one step to safeguarding them against a natural disaster. Maintaining back-up copies of your files on CDs, DVDs or jump drives is an even better solution. Keep your back-up copies is a separate location to avoid losing the information from both sources in a worst-case scenario. There are also online data storage facilities that will securely house your information virtually - your copies could be stored on a server in New Mexico and accessed privately from anywhere in the world via an internet connection.

What kinds of documents should you keep electronic copies of? Everything that is not easily duplicated or accessed more than once. Recommendations include three years' worth of:

  • Bank statements
  • Investment account information
  • Tax returns and all related documentation
  • Insurance policies
  • Home mortgage and closing records
  • Estate plans
  • Wills, trusts, and other personal family information
  • Birth, adoption, death and marriage certificates*

*Electronic copies of these documents may not be legally binding, but will make it easier to obtain duplicates should the need arise.

Document Your Valuables
>Once per year, document the items of value in your home. A particularly good way to record your inventory of valuable items is to photograph or videotape the contents of your home, and subsequently date the records. Maintain a current record using a photo album and an electronic copy on your computer or disk. Make sure to add new items as they are obtained and include as much of the details as possible in your file. The IRS has a disaster loss workbook (>Publication 584>) that can help you compile a room-by-room list of your belongings.

Compiling a visual record of your items along with receipts and other documentation will help you remember and prove their market value for insurance claims due to a disaster, theft or other loss. Maintaining an accurate account, including the date purchased or recorded, will make the claim process much easier. Send a copy of your visual records on disk or other portable medium to a family member or friend in another state for safekeeping. Having a second account of your valuables in a remote location is one way to ensure that at least one copy of the records will remain safe in the event of a disaster.

Check on Fiduciary Bonds
>Employers who use payroll service providers should ask the provider if they have a fiduciary bond in place. The bond could protect the employer in the event of default by the payroll service provider.

Update Emergency Plans
>Emergency plans should be reviewed annually. Personal and business situations change over time and so do preparedness needs. You should make sure you are saving such things as W-2s, home closing statements and insurance records. When employers hire new employees or when a company or organization changes functions, plans should be updated accordingly and employees should be informed of the changes.

Prepare a disaster kit for your home
Stock up on non-perishable food and water to sustain you and your family for up to 72 hours or longer. Ensure you have important papers (e.g. insurance, identification), first aid kit, a supply of prescription medicines and other specialty items in your preparedness kit. In addition, plan to have an emergency kit for your car in case you need to evacuate. While creating a disaster kit, pet owners should remember to pack the necessary items for their pets.

You can find more information on preparing your disaster kit at: >www.ready.gov/america/getakit/index.html

Additional resources
IRS.gov is an indispensable resource as you prepare for and recover from disaster. Be sure to check out the following topics:

 

 

 

Source:  Internal Revenue Service, http://www.irs.gov/

 

Robert H. Sacks, CPA is a Principal in the Tax Services Department and is based out of our Boca Raton office. A seasoned professional, he monitors tax law changes and helps oversee our tax practice to ensure that the highest quality technical services are provided and compliance standards are maintained. Rob has been practicing public accounting for 25 years, with a focus on international tax and real estate issues, including complex tax transactions and structuring. He also provides consulting on executive compensation, mergers and acquisitions, and due diligence. Contact Rob directly via email at rsacks@daszkalbolton.com or by phone at 561.953.1488.


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