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Recordkeeping: Be prepared to weather the tax storm

by on
in Small Business Tax,Small Business Tax Deduction Strategies

With hurricane season here and memories of last year’s natural disasters still fresh in our minds, the IRS has released record-keeping tips for taxpayers. (IRS Fact Sheet 2006-19)

Here’s a brief overview:

• Start to store records electronically. Request bank statements and other documents via e-mail. Scan all hard-copy records into electronic format and save them onto a computer drive, CD or DVD.

• Keep an inventory of your valuables. IRS Pub 584 (Casualty, Disaster and Theft Loss Workbook) includes a workbook for creating an inventory. It also suggests photographing or videotaping the valuables. See www.irs.gov/publications/p584 /index.html.

• Consider fiduciary bonds in case your payroll service provider defaults.

• Create or update emergency plans on an annual basis. Keep track of important individual documents, such as W-2s.

Strategy: If you don’t want to—or can’t—go electronic with all your records, store hard copies in a secure, waterproof, fire-resistant box. Also, maintain copies of the most important documents off-site.

Tip: Contact the IRS promptly in the event of a disaster. Order copies of returns and transcripts by using Form 4506 (Request for Copy of Tax Return) or Form 4506-T (Request for Transcript of Tax Return).You can secure them at www.irs.gov/faqs/faq-kw38.html.

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