How to Reconstruct Tax Records in Hurricane’s Aftermath

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Ken Berry
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When a natural disaster strikes — such as Hurricanes Harvey and Irma — your first instincts are to worry about loved ones and then your personal property, such as a home. It’s likely that your tax records aren’t high on the list. However, if records have been destroyed or are illegible, it could cost you thousands of tax dollars when you can’t prove your losses.

But you don’t have to throw up your arms in despair. It may be possible to reconstruct certain tax records with a little work. In the wake of the two major hurricanes, the IRS has issued a new Fact Sheet providing valuable insights (FS-2017-11, September 2017).

Here’s an overview of the key elements:

Tax records. When reconstructing tax records, the IRS advises taxpayers to take the following steps:

  • Get free return transcripts immediately by visiting the Get Transcript tool on IRS.gov.
  • To order transcripts by phone, call 800-908-9946 and follow the prompts. Taxpayers can also request transcripts using their smartphone with the IRS2Go mobile phone app.
  • To obtain transcripts of previous years returns by mail, file a Form 4506-T, Request for Transcripts of a Tax Return. 
  • To request copies of past returns by mail, file Form 4506, Request for Copy of Tax Return. 
  • Write the appropriate disaster designation, such as “HURRICANE HARVEY” or “HURRICANE IRMA” in red letters across the top of Forms 4506-T and 4506 to expedite processing and to waive the normal user fee.

Homes and other real estate. Your personal residence and other real estate you own, such as a vacation home or investment property, may have been damaged by a storm. The IRS says to:

  • Take photographs or videos as soon after the disaster as possible. This helps establish the extent of the damage.
  • Contact the title company, escrow company or bank that handled the purchase of the home to get copies of appropriate documents. Real estate brokers may also be able to help.
  • Use the current property tax statement for land-versus-building ratios, if available. If they are not available, owners can usually get copies from the county assessor’s office.
  • Establish a basis or fair market value of the home by reviewing comparable sales within the same neighborhood. This information can be found by contacting an appraisal company or visiting a website that provides home valuations.
  • Check with the mortgage company for copies of appraisals or other information they may have about cost or fair market value in the area.
  • Review insurance policies, as they usually list the value of a building, establishing a base figure for replacement value insurance. For details on how to reach the insurance company, check with the state insurance department
  • If improvements were made to the home, contact the contractors who did the work to see if records are available. If possible, get statements from the contractors verifying their work and cost.
  • For inherited property, check court records for probate values. If a trust or estate existed, contact the attorney who handled the estate or trust.
  • If no other records are available, check the county assessor’s office for old records that might address the value of the property. 

Vehicles. Was your vehicle damaged or destroyed in floodwaters? There are several resources that can help determine the current fair market value of most makes and models. This includes:

  • Kelley’s Blue Book 
  • National Automobile Dealers Association   
  • Edmunds

In addition, call the dealer where the car was purchased and ask for a copy of the contract. If this is not available, give the dealer all the facts and details, and ask for a comparable price figure. If making payments on the car, check with the lien holder.

Personal property. It may be difficult to reconstruct records showing the fair market value of some types of personal property. Here are several points to consider when cataloguing lost items and their values:

  • Look on mobile phones for pictures that were taken in the home that might show the damaged property in the background before the disaster.
  • Check websites that can help establish the cost and fair market value of lost items.
  • Support the valuation with photographs, videos, canceled checks, receipts or other evidence. 
  • If items were purchased using a credit card or debit card, contact the credit card company or bank for past statements. Credit card companies and banks often provide user’s access to these statements online.
  • Draw up a floor plan showing where each piece of furniture was placed -- including drawers, dressers and shelves.
  • Sketch pictures of the room looking toward any shelves or tables showing their contents. These do not have to be professionally drawn, just functional.
  • Take time to draw shelves with memorabilia on them.
  • Be sure to include garages, attics, closets, basements and items on walls.

Business records. Individuals aren’t the only victims. Many businesses will also share in the losses.

  • To create a list of lost inventories, get copies of invoices from suppliers. Whenever possible, the invoices should date back at least one calendar year.
  • Check mobile phones or other cameras for pictures and videos taken of buildings, equipment and inventory.
  • For information about income, get copies of bank statements. The deposits should closely reflect what the sales were for any given time period.
  • Obtain copies of last year’s federal, state and local tax returns. This includes sales tax reports, payroll tax returns and business licenses from the city or county. These will reflect gross sales for a given time period.
  • If there are no photographs or videos available, sketch an outline of the inside and outside of the business location. Then start to fill in the details of the sketches.
  • If the business was pre-existing, go back to the broker for a copy of the purchase agreement. This should detail what was acquired.
  • If the building was newly constructed, contact the contractor or a planning commission for building plans.

Clients residing in disaster areas, or owning property there, may be turning to you for tax assistance. Show them the compassion and professionalism needed to help them through these hard times. 

About Ken Berry

About Ken Berry

Ken Berry, Esq., is a nationally known writer and editor specializing in tax, financial, and legal matters. During his long career, he has served as managing editor of a publisher of content-based marketing tools and vice president of an online continuing education company. As a freelance writer, Ken has authored thousands of articles for a wide variety of newsletters, magazines, and other periodicals.           

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Sep 20th 2017 17:46

While the information in this article is useful and timely, I don't see that most of it pertains to "reconstructing" tax records. A lot of this article deals with establishing values for loss write offs of a personal nature; again very useful.

However, when it comes to business records, I think reconstruction is probably the correct terminology. This can be very cumbersome and consuming to do. That said, with the plethora of cloud based services available today, accounting records could be easily maintained. Also, if using a Dropbox type of service, important business documents can be scanned and stored in the cloud (e.g., contracts, lease agreeements, HR records, etc.).

One thing I would add, however: Invest in a safe deposit box to store insurance policies, vehicle titles, large purchase receipts, home improvement project receipts, etc. This should make things a bit easier, I would imagine.

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