Protect Your Financial Records from the Unexpected
Wildfires, severe storms, floods, earthquakes and other emergencies can occur with little warning. Although personal safety comes first, advance financial preparation can make insurance claims, disaster assistance applications and tax filings considerably easier afterward.
Create secure electronic copies
Important documents should not exist in only one physical location. Consider scanning or downloading copies of:
- Recent tax returns and supporting documents
- Property purchase and improvement records
- Insurance policies
- Bank, investment and retirement-account statements
- Estate-planning documents
- Business formation, payroll and accounting records
- Vehicle and equipment purchase documents
- Identification and contact information
Store electronic copies in a secure cloud account or on encrypted media maintained away from the home or business. Review the backup periodically to ensure that it is complete and accessible.
Document property and valuables
Photographs or videos can help establish the condition and contents of property before a loss. Walk through each room and record furniture, electronics, appliances, artwork, jewelry and other valuable items. Businesses should also document inventory, machinery, computers, vehicles and leasehold improvements.
Retain receipts, appraisals and serial numbers for significant assets when available. Update the inventory after major purchases or improvements.
Review insurance and continuity plans
Insurance coverage should be reviewed before an emergency, not afterward. Confirm applicable limits, deductibles and exclusions for the risks most relevant to your location. Businesses should also understand their business-interruption coverage and determine how payroll, bill payment, customer communications and access to accounting systems would continue following a disruption.
Make a list of key contacts, including insurance professionals, financial institutions, payroll providers, attorneys and accountants. Keep a copy somewhere accessible outside the affected property.
Understand disaster-related tax relief
When the federal government designates an area for disaster relief, the IRS may postpone certain filing and payment deadlines for affected taxpayers. The relief varies by disaster and does not necessarily apply to every tax obligation or every taxpayer experiencing a loss.
Do not assume that a deadline has been extended based solely on a state or local emergency declaration. Confirm that the IRS has identified the taxpayer’s location as a covered disaster area and review the specific relief announcement.
Casualty-loss deductions are also subject to detailed eligibility, documentation and reimbursement rules. Insurance recoveries, grants and other assistance may affect the amount and timing of a potential deduction.
Preparation can reduce the burden
Recovering after a disaster is difficult enough without having to reconstruct years of financial records. A few hours spent organizing documents, updating inventories and testing backups can save considerable time and expense later.
Please contact your DBMCPA advisor if you need copies of previously filed returns or assistance organizing your tax and accounting records as part of an emergency-preparedness plan.
