“ALWAYS BE PREPARED…”BondBeebe
Billy Thomas, CPA
Do you have a personal disaster recovery plan? We like to think disasters can never happen here, but as we have seen by many recent tragedies across the globe, disaster can strike anywhere and when we least expect it.
The IRS recently released a very helpful and timely guide to safeguarding tax records in concurrence with the start of Hurricane Season on June 1st. Nonetheless, here are some additional steps recommended by the IRS for you to safely store your records prior to an emergency.
To begin, the IRS suggests retaining income tax records for at least a minimum period of time. Generally, as long as you file a return, you should retain your records for three (3) years from the due date of the return. Three years represents the standard statute of limitations for filing an amended return claiming a refund or the period of time the IRS can assess any additional tax unless one of the following applied:
• You fail to report 25% or more of your income in a given year – retain records for six (6) years
• You file a claim for a loss from a worthless security – retain records for seven (7) years
Given our current digital age, it is easier than ever to retain your tax records for the recommended time frame. Essentially, this is the first step to safeguarding your tax records. This step is to create a duplicate file of your income tax records and then store them in a safe place. A safe place can include a storing your records in a secure digital ‘cloud’, downloading your records on an external hard drive or other similar external digital format, and even making paper copies that can be stored in your personal fire-proof box.
Next, the IRS suggests documenting any family valuables such as jewelry and other personal effects. For some of these items, it may be best to store them in the same personal fire-proof box or safety deposit box at your chosen financial institution. Otherwise, another suggestion is to take pictures of these items, which may also be helpful in filing related insurance claims. The IRS refers to Publication 584 in their recent news release as a resource for helping you document these types of belongings. A disaster loss workbook is included in the publication to help get you started.
In the event of a disaster, it is important to remember there are many resources to help you get back on your feet quickly.
Helpful IRS resources found at “IRS.gov”:
Publication 547 – Casualty, Disaster and Thefts
Publication 584 – Casualty, Disaster, and Theft Loss Workbook
Publication 552 – Recordkeeping for individuals
IRS News Release 2011 – 59