You never know when a natural disaster will strike, or when an unexpected catastrophe will occur. Businesses and individuals need to be aware of the impact that such events can have on their tax records.
Indeed, from past tax returns to current documentation that you plan to use as you prepare this year’s taxes, you need to make sure that your records are safe. If they are destroyed, it can be difficult to back up your claims. And you might end up missing a vital piece of information.
One way you can safeguard your information is to keep important documents in a fireproof/waterproof safe. It’s also possible to store them securely off-site, perhaps in a safe deposit box.
Do You Have Backups?
One of the best things you can do is to backup your records electronically. Many banks keep statements digitally on file for up to 12 months. This makes things a little bit easier. If you have documents that aren’t available online electronically, you can create your own backup by scanning the information and creating a digital file.
This is a good idea for business receipts, as well as other documents. There are apps that even allow you to snap pictures of your receipts with your smartphone and then organize them later.
As you create a backup, remember that you want to be careful with how it is done. Don’t just leave it on your computer. If you do this, you run the risk of losing it if your computer is destroyed. Instead, keep the information on a thumb drive in a fireproof/waterproof safe. You can also keep the information in an online backup such as with DropBox or Google Drive. There are a number of services that can help you back up your data so that it is accessible from anywhere. At the very least, you can send yourself an email with the attached files so that you have accessible records stored on your email provider’s server.
If you are concerned about sensitive information, encrypt or password-protect your files.
What if there is a Problem?
If you do run into a problem due to a disaster, you can contact the IRS for help and advice. You can call 1-866-562-5227 for information and advice. Additionally, if you have lost some of your previously filed returns due to disaster, you can fill out Form 4506. This will allow you to get access to copies of major forms. If you want information on online items, you will need to use Form 4503T-EZ. This will help you get transcripts of line items.
However, it’s important to note that the IRS might not have all of your supporting information and documents on file. Receipts that you use to back up your business expenses, and individual timesheets, might not be available from the IRS. You can’t rely on the IRS to have everything. As a result, it is important that you keep your records in a safe place, and back them up in a way that allows you access to them in the event that originals are destroyed.