May 30th 2013
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By Ken Berry
Now that hurricane season is arriving, the IRS has posted fair warning to taxpayers who may be affected by natural disasters and is encouraging both individuals and businesses to take the appropriate steps to safeguard themselves against a potential catastrophe (IR-2013-56, 5/29/13).
What should you do? Pass along this important information to clients who reside in traditional danger zones. The IRS suggests that taxpayers take the following steps:
1. Create backup electronic records. Start by keeping a set of backup records in a safe place far away from the original set. It's now easier to keep backup records – for example, bank statements, tax returns, insurance policies, etc. – because many financial institutions provide statements and documents electronically. Also, much of the financial information is available online. Even if the original records are only provided on paper, they can be scanned into an electronic format. With documents in electronic form, taxpayers may download them to a backup storage device, such as an external hard drive, or burn them to a CD or DVD.
2. Document valuables. Another step a taxpayer can take to prepare for disaster is to photograph or videotape the contents of his or her home, especially those items of higher value. The IRS has a disaster loss workbook, Publication 584, which can help you compile a room-by-room list of belongings. In addition, taking photographs can help prove the market value of items for insurance and casualty loss claims. The photos should be stored with a friend or family member who lives outside the area.
3. Update emergency plans. Emergency plans should be reviewed annually. Personal and business situations often change over time as do the needs for preparation. When employers hire new employees, or when a company or organization changes functions, you should update the plans accordingly. Don't forget to inform employees about any changes.
4. Check on fiduciary bonds. Employers who use payroll service providers should ask the provider if it has a fiduciary bond in place. The bond may protect the employer in the event of default by the payroll service provider.
If a hurricane strikes, taxpayers can call (866) 562-5227 toll free to speak with an IRS specialist trained to handle disaster-related issues. Back copies of previously filed tax returns and all attachments, including Forms W-2, can be requested by filing Form 5406, Request for Copy of Tax Return. Alternatively, transcripts showing most line items on these returns can be ordered by calling (800) 908-9946 or by using Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript, or Form 4506-T, Request for Transcript of Tax Return.
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