By Kelly Phillips
Earlier today, Hurricane Florence became a Category 4 major hurricane. It’s will probably make landfall on the U.S. East Coast later this week - likely on Thursday - bringing flooding rains and heavy winds. Tracking a storm can be unpredictable at best, but most models show the storm slamming the southeastern North Carolina coast. If it does so, at current wind speeds, it will only be the fourth Category 4 storm to make landfall along the U.S. East Coast north of Georgia.
That’s scary news for those on the east coast, including my friends and family. Some areas are subject to mandatory evacuations, while other folks like my parents are opting to leave voluntarily. I’ve done this dance before, trying to figure out what to take with you on what will hopefully be a short stay away from home and finding peace with what to leave behind. It’s tough at the best of times. While the priority for those who are evacuating should be to move to safety, the Internal Revenue Service (IRS) is reminding those individuals and businesses in other parts of the country that it’s a good time to create or update their emergency preparedness plans.
The Department of Homeland Security offers tips and resources on ready.gov to help you craft an emergency plan suitable for your situation. One size plan doesn’t fit all. Your needs can vary depending on whether you have children, individuals with disabilities, senior citizens, or pets.
It doesn’t stop there. Your emergency plan should also include ways to protect the things that you own, including valuables and business equipment. You also want to make sure that your key documents are in a safe place. Here are some things to keep in mind:
Protect original documents, including bank statements, tax returns, deeds, and insurance policies by storing your documents in a safe place. There is no single "safe place" for records: it depends on your lifestyle. In my case, it's a mix of keeping records above-ground (basements in this part of the world can be damp) and away from prying eyes and sticky fingers (since we have kids). You'll want to consider not only dampness but pests, sun bleaching, and other nature-related alterations when making decisions about where to store documents.
Records should be stored securely but in an easy to reach spot: I don't recommend safe deposit boxes for tax and other business documents because they can be inconvenient. Locking file cabinets and home safes (fireproof is best) are good alternatives.
Consider scanning select records and storing them electronically. The IRS has accepted scanned receipts since 1997, a policy that was memorialized by Rev. Proc. 97–22 (downloads as a pdf). Be sure that your scanned or electronic receipts are as accurate as paper records. Your records must be organized, and you must be able to produce them in a hard copy form if needed.
If you rely on the cloud for offline storage, be sure that it's both secure and that there's a reliable backup system.
Do not assume that your tax professional will retain sufficient copies of your records for you. It's your responsibility to produce documentation to IRS upon request so don't toss out your information because you assume that you can get them from your accountant or tax preparer.
While you can always order tax transcripts and tax histories from the Internal Revenue Service in a pinch, you're at their mercy as to availability, accuracy, and completeness. Additionally, the IRS doesn't retain supporting documentation, such as receipts and donor letters - that's your job - and you may need those to substantiate deductions and credits.
Once you secure your records, make an extra set of key documents to keep with a family member or trusted friend.
Take pictures or videos of the contents of your home or business, especially high-value items. Documentation can help support insurance claims, as well as any tax benefits like a casualty loss. Remember that the deduction for personal casualty and theft losses is repealed for the tax years 2018 through 2025 except for those losses attributable to a federal disaster as declared by the President. For more on casualty losses after a disaster, click here.
Don’t be hesitant to take advantage of available resources. The IRS has a disaster-loss workbook for individuals (Publication 584, Casualty, Disaster, and Theft Loss Workbook) and businesses (Publication 584-B, Business Casualty, Disaster, and Theft Loss Workbook) that can help you compile lists of belongings or business equipment.