No one knows if and when a disaster will strike. But the IRS wants you to be prepared for the possibility.
Alert: The IRS is warning taxpayers to safeguard their records. It points out that a few simple steps can help protect individuals and businesses.
Here are six tips the IRS recently listed concerning disaster preparation. (IRS Tax Tips 2009-59)
1. Maintain good records. Take advantage of paperless record-keeping for financial and tax records. Many people receive bank statements and documents by e-mail. This method is an outstanding way to secure financial records. Important tax records such as W-2s, tax returns and other paper documents can be scanned onto an electronic format. You can copy them onto a “key” or “jump drive” periodically and then keep the electronic records in a safe place.
2. Document valuables and business equipment. The IRS has disaster loss workbooks for individuals and businesses that can help you compile a room-by-room list of your belongings or business equipment. This will help you recall and prove the market value of items for insurance and casualty loss claims.
3. Check on fiduciary bonds. Employers that use payroll service providers should ask the provider whether they have a fiduciary bond in place. The bond could protect the employer in the event of default by the payroll service provider.
4. Plan ahead for business contingencies. How quickly your company can get back to business after a disaster often depends on emergency planning done today. Start planning now to improve the likelihood that your company will survive and recover. Review your emergency plans annually. Just as your business changes over time, so do your preparedness needs. When changes are required, you should update your plans and inform your people.
5. Update emergency plans. Emergency plans should be reviewed annually. Individual taxpayers should make sure they are saving documents everybody should keep, including W-2s, home closing statements and insurance records. Make sure you have a means of receiving severe weather information; if you have a NOAA Weather Radio, put fresh batteries in it. Be aware of what you should do if threatening weather approaches.
6. Count on the IRS. In the event of a disaster, the IRS says it is ready to help. It has valuable information you can request if your records are destroyed. If you have been impacted by a federally declared disaster, you may receive copies or transcripts of previously filed tax returns free of charge by submitting Form 4506, Request for Copy of Tax Form, or Form 4506-T, Request for Transcript of Tax Return, clearly identified as a disaster-related request.
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