As “hurricane season” officially begins, the IRS has released a number a tax tips, reminders and other advice to help taxpayers weather the storm of natural disasters and similar emergencies. The underlying theme for all IRS “tax tips” is that recordkeeping has generally become easier in the digital age. However, it remains the primary responsibility of the taxpayer to preserve adequate records whether or not caused by a disaster.
Bottom line: Although the IRS will often extend filing deadlines and generally offer “hot line” accessibility, the “burden of proof” on substantiation and other requirements found within the tax laws is ultimately placed upon the taxpayer’s shoulders.
The IRS advises taxpayers to consider taking the following steps, among others, to better prepare for hurricanes and other emergencies:
Emergency plans. Personal and business situations change over time, as do preparedness needs. An emergency plan, both at home and in business, whether for safety or to prepare for insurance claims and tax contingencies, should be updated annually.
Digital copies of key documents. The IRS advises that taxpayers should keep a duplicate set of key documents including bank statements, tax returns, identifications and insurance policies in a safe place, away from the original set. The IRS observes that maintaining an additional set of records should be easier these days, with many financial institutions providing statements and documents electronically and on secure internet sites. Even if the original records are only provided on paper, the IRS suggests scanning them into an electronic format.
Taxpayers should also photograph or videotape the contents of their residences, especially items of higher value. The IRS disaster loss workbooks and Publication 584 can help taxpayers compile a room-by-room list of belongings. A photographic record can help taxpayers prove the fair market value of items for insurance and casualty loss claims. Ideally, photos should be stored outside the area of the home or office.
Payroll providers. The IRS suggests that employers who use payroll service providers should ask the provider if it has a fiduciary bond in place. It notes that the bond could protect the employer in the event of default by the payroll service provider.
IRS data storage. Back copies of previously-filed tax returns and all attachments, including Forms W-2, can be requested by filing Form 4506, Request for Copy of Tax Return. Alternatively, transcripts showing most line items on these returns can be ordered through the Get Transcript tool available on the IRS website, or by calling 1-800-908-9946 or by using Form 4506T-EZ, “Short Form Request for Individual Tax Return Transcript” or Form 4506-T, ” Request for Transcript of Tax Return.”