Preparing for a Disaster (Taxpayers and Businesses)

Wednesday, June 03, 2015

Recent tornadoes and massive flooding in the western United States have caused not only major property damage to personal possessions but to many businesses as well.  Additionally, June 1st marks the beginning of Hurricane season; therefore, having a plan for business and personal data and record access is an important part of being prepared. Below are some simple steps that can help taxpayers and businesses protect financial and tax records in case of disasters.  The IRS also offers a video on their website www.irs.gov “Preparing for a Disaster”

  1. Take Advantage of Paperless Record keeping for Financial and Tax Records
    Don’t rely on your tax preparer to have your current documents.  If you are not already receiving bank statements and documents by e-mail, you want to sign up for this service. Electronic format is an excellent method of securing financial documents. Other important tax records such as W-2s, tax returns and other paper documents should be scanned onto an electronic format and saved on a thumb (or jump) drive for portability.  Many software companies offer excellent scanning and record retention software.

    Be sure to keep a backup copy of your data and store it in a save place such as a safety deposit box or on the cloud.  You want this data to be stored away from your home or office because in the advent of a natural disaster, backup data would be destroyed if the office or home were destroyed; therefore, convenience of access to the data is NOT of primary importance. 

  2. Document Valuables and Business Equipment
    Avail yourself of other IRS resources such as their disaster loss workbooks for individuals ( Publication 584, Casualty, Disaster, and Theft Loss Workbook) and businesses ( Publication 584-B, Business Casualty, Disaster, and Theft Loss Workbook) that will help you gather a detailed listing of belongings and also calculate their fair market value (FMV).  It is also important to write the serial numbers of items as well as taking a photo.  The list and photos will help with any potential insurance claim.  Once again, store this information away from your home or business.
  3. Check on Fiduciary Bonds
    If you are an employer that uses a payroll service provider you should ask if the provider has a fiduciary bond in place that could help you as the employer if the provider defaults on a payroll.
  4. Continuity of Operations Planning for Businesses
    The planning done today will determine how quickly your company can get back to business after a disaster. It is never too early to start planning so you can improve the likelihood that your company will survive and recover. Review your emergency plans annually and update them as needed because your business preparedness needs change over time just as your business changes over time.
    • The following is a list of preparedness strategies that can be applied to all types of disasters.
    • Get informed about hazards and emergencies and learn what to do for specific hazards.
    • Develop an emergency plan.
    • Learn where to seek shelter from all types of hazards.
    • Back up your computer data systems regularly.
    • Decide how you will communicate with employees, customers and others.
    • Use cell phones, walkie-talkies, or other devices that do not rely on electricity as a backup to your telecommunications system.
    • Collect and assemble a disaster supplies kit. Include a portable generator.
    • Identify the community warning systems and evacuation routes.
    • Include required information from community and school plans.
    • Practice and maintain your plan.
    • Make sure you have a means of receiving severe weather information; if you have a NOAA Weather Radio, put fresh batteries in it. 
  5. Additional resources available from IRS
    Immediately after a casualty, you can request a copy of a return and all attachments (including Form W-2) by using Form 4506, Request for Copy of Tax Return (PDF).

    If you just need information from your return, you can order a transcript by calling (800) 829-1040 or using Form 4506-T, Request for Transcript of Tax Return (PDF). There is no fee for a transcript. Transcripts are available for the current year and returns processed in the three prior years. IRS.gov is an indispensable resource as you prepare for and recover from disaster.
Tax Planning