Hurricane Tax Survival Tips

Taxpayers typically think of 1000 other things when preparing for a storm other than what happens if the storm wipes out their tax records. How are you going to file next year if your records are destroyed because of a flood or other natural disaster?

This week’s blog post is to give you very simple and helpful tips when preparing your documents so that if the worst-case scenario happens and you are affected by a major storm, you will be prepared.
A primer before we get started. I have had multiple audit clients that did not heed these steps and happened to get an audit. They were hit with very large tax bills because they couldn’t prove their expenses and income and although the returns were legitimate when filed, it didn’t matter because they had no other way to prove their income and deductions other than those lost or ruined documents.
What do I do if I lost my income documents or can’t find them?

The IRS has a record of all income reported by others whether it’s a w-2 or 1099. You can ask for what’s called a wage and income transcript. However, if you were paid cash, this transcript will not help you. You can do this online at irs.gov.

What do I do if I lost my tax return from last year and need a copy of it in order to do this year’s returns?

Again, you can contact the IRS and ask for what’s called a tax return transcript at irs.gov.

What can I do to protect my deductions in case my receipts and other documents get lost or destroyed?

The easiest thing to do is to have an electronic backup of all of your documents. Put it on a flash drive and store it outside of your home in a safe deposit box or at work if you can do so securely. But, that can be a herculean task if you are in an industry with a lot of paper so try to store the information up high in your home such as an attic or other location where it will stay dry even if water comes into your home. Storage sheds such as Public Storage might be useful if they are on higher floors and climate controlled. Otherwise, in general, if you pay by check or credit card, at least you can get those statements later to prove your deductions. BUT BEWARE: This only helps if the expense is obvious like Office Depot. If it’s Wal Mart or Sams, the IRS isn’t going to give you the deduction unless they see the receipt because they don’t know if the expense is personal or for your business.

These are just some suggestions to keep in mind as we are in the midst of the hurricane season and as we Houstonians get ready to remember the first anniversary of Harvey. Taking these suggestions to heart might help you in the future should the big, bad IRS come knocking!