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Are Your Important Tax Documents Safe in Case of a Disaster?

Are Your Important Tax Documents Safe in Case of a Disaster?

If there’s anything that this season’s series of hurricanes and wildfires should teach us, it’s that disaster can strike in the blink of an eye, with little to no warning. After watching the devastation in the Caribbean, the South, and now the West, it would be naïve to think that any of us are immune from losing everything, so it’s time to stop feeling invulnerable and start making plans. 

Take Action While You Have Time

It doesn’t take a lot of thought to realize just how much you could lose in a fire, flood or earthquake. Beyond your possessions, there are the photos, the documents, the insurance policies and business records … many are irreplaceable, while others would be extremely difficult to replace, especially under duress.

The best way to address this situation is when things are calm and you don’t have to. Set aside a specific time to do it so that you don’t procrastinate, and start by figuring out exactly what documents are most important or irreplaceable. Create duplicates if you can and then store them in a waterproof or fireproof container that you keep in a separate location. The originals should also be stored in a way that protects them. Better yet, take the time to make digital copies of your originals and then store them in the cloud. There are plenty of digital storage sites that make it easy for you to upload and access: many of them are free, while others charge a minimal fee while providing the security of knowing that your documents, records, and photos are safe.

For your personal photos, it’s a good idea to go beyond printing photos out and keeping them in albums. Even storage media can be destroyed, so take advantage of sites like Shutterfly or Google Photos to make sure that you have access to your photos at any time. New photos are easily uploaded, while those that were taken before digital media can be photographed using a digital camera and then uploaded. The process is time-consuming, but if you need any evidence of whether it’s worthwhile, just turn on your television and listen to disaster survivors – it’s their photos that they weep for the most.

Another useful tip is to take photos or videos of all of the contents of your home and/or business, then upload them into a specifically labeled file into the cloud as well. Following a loss, it is nearly impossible to remember every item that you owned that will need to be replaced. Having a visual record will help you prepare your insurance claims more accurately, as well as provide proof where any questions may arise.

In addition to your own storage strategy, most of the banks and investment companies operate on a digital basis today, and can generally help you recover documents if they are lost. Some can be immediately accessed just by logging in, while others may require you to request back copies. Some limit the amount of time that they hold onto their digital records, so it’s a good idea to have your own copies of any that are particularly important to you.

Though photos, birth certificates, and insurance policies are all documents you want to hold on to for an extended period, from a financial and legal perspective there are certain requirements for how long you need to keep other, more short-lived records. The government requires you to keep your tax returns for a maximum of 3 years after the due date or filing date for each year’s tax returns. That means that if you file your 2017 tax return on February 28th of 2018, you have to keep them until April 15th of 2021.  Your state may have longer record-keeping requirements, and there are some documents that also may need to be kept longer. Digital copies are acceptable, so it’s a good idea to store these records in the cloud.

The IRS and other organizations have provided a number of resources to help guide you through record-keeping and disaster preparedness. Here are some of the best:

Self-Help Publications:

  • Disasterassistance.gov
  • Federal Emergency Management Agency
  • IRS Publication 2194, Disaster Resource Guide for Individuals and Businesses
  • IRS Publication 583, Starting a Business and Keeping Records
  • Ready.gov
  • Small Business Administration
  • Tax Relief in Disaster Situations

If you have any questions about how long you need to retain certain records, don’t hesitate to seek professional help.

Jon Osborn, EA writes for TaxBuzz, a tax news and advice website. Reach his office at [email protected].

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Steward Financial

Steward Financial

Jon Osborn is a tax preparer based in San Dimas, California. His company, Steward Financial Services, offers a broad range of tax preparation, accounting and business consulting for small businesses. He loves to work with clients who are looking for answers to complex tax and business planning issues. He has owned several small businesses and worked with over one hundred small business owners. He helps his individual and business tax clients find the best ways to spend their money in order to minimize IRS tax. Small businesses looking to grow, sell or just increase cash flow are one of Jon's specialties.

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