Recordkeeping: Be prepared to weather the tax storm

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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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