With the 2013
hurricane season now under way and memories of tornadoes and other natural
disasters fresh in our collective minds, now is the time for individuals and
businesses to safeguard their tax records by taking a few simple steps.
Take
Inventory. Gather all of
your documents and make an inventory list. You may find everything in a single
location, but more likely than not, you'll have to hunt around to find all of
your documents. Don't forget to check computer files, storage boxes, file
cabinets, old and new computers and laptops, thumb drives, and external hard
drives and backup disks.
Depending on how
complex your finances are, you may opt for a single list or choose to make two
separate lists. The first list might include items such as insurance policies,
mortgages and deeds, car titles, wills, pension and retirement-plan documents,
powers of attorney, medical directives, and so on. The second list might
contain a list of less essential documents such as brokerage accounts, loans
that have been paid off, end-of-year bank statements, and copies of old tax
returns and supporting documentation.
Create a
Backup Set of Records and Store Them Electronically. Keeping a backup set of records --
including, for example, bank statements, tax returns, insurance policies, etc.
-- is easier than ever now that many financial institutions provide statements
and documents electronically, and much financial information is available on
the Internet.
Even if the
original records are provided only on paper, they can be scanned and converted
to a digital format. Once the documents are in electronic form, taxpayers can
download them to a backup storage device, such as an external hard drive, or
burn them onto a CD or DVD (don't forget to label it).
You might also
consider online backup, which is the only way to ensure that data is fully
protected. With online backup, files are stored in another region of the
country, so that if a hurricane or other natural disaster occurs, documents
remain safe. Contact us if you need assistance with this.
Visually
Document Valuables.
Another step you can take to prepare for disaster is to photograph or videotape
the contents of your home, especially items of higher value. Call us for more
help compiling a room-by-room list of belongings.
A photographic
or video record can help prove the fair market value of items for insurance and
casualty loss claims. Store the photos or video with a friend or family member
who lives outside the area, or as part of your online document backup.
Update
Emergency Plans.
Emergency plans should be reviewed annually. Personal and business situations
change over time, as do preparedness needs. When employers hire new employees
or when a company or organization changes functions, plans should be updated
accordingly and employees should be informed of the changes.
Check on
Fiduciary Bonds. Employers
who use payroll service providers should ask the provider if it has a fiduciary
bond in place. The bond could protect the employer in the event of default by
the payroll service provider.
Managing Tax
Records After You File
Keeping good
records after you file your taxes is a good idea, as they will help you with
documentation and substantiation if the IRS selects your return for an audit.
Here are five tips to keeping good records.
1. Normally, tax
records should be kept for three years.
2. Some
documents, such as records relating to a home purchase or sale, stock
transactions, IRAs, and business or rental property, should be kept longer.
3. In most
cases, the IRS does not require you to keep records in any special manner.
Generally speaking, however, you should keep any and all documents that may
have an impact on your federal tax return.
4. Records you
should keep include bills, credit card and other receipts, invoices, mileage
logs, canceled, imaged or substitute checks, proofs of payment, and any other
records to support deductions or credits you claim on your return.
Call us today if
you need more information on what kinds of records you should keep and for how
long.
Barry Eisenberg, SCORE Counselor, email: barrye003@aol.com
Visit us at: www.scoresouthflorida.net
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