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Five Tax Tips for Hurricane Season

As localized natural disasters continue to wreak havoc on a more global scale, it seems Mother Nature is finding new and frightening ways to disrupt our daily lives. From hurricanes and floods to droughts and forest fires, it’s no wonder we must think about how these “outdoor” occurrences might affect “indoor” living. May observes National Hurricane Preparedness Week in preparation for hurricane season, June 1 through November 30. Surviving these storms isn’t always about just physical survival, but one’s economic survival as well.

American taxpayers need to take steps to ensure they can weather a tropical storm or hurricane by making an emergency plan—or updating an existing one—and that’s where their trusted tax professional can help. Here are five tips from the IRS that you can pass along to clients ahead of hurricane season.

1. Secure Important Documents

Every taxpayer has documents that provide proof of identity and property ownership—from tax return records and birth certificates to property titles and deeds. Whenever possible, these records need to be kept in a waterproof container and stored in a secure space.

Copies of these documents should be kept off-site (such as a bank deposit box), so that the records survive even if the home is damaged or destroyed. Electronic copies can be treated the same way, with scanned documents loaded onto a flash drive or some other stable form of media and duplicates kept off-site just like paper documents.

2. Document What’s Valuable

In the case of hurricane damage to their home, taxpayers should take photos or videos of the contents beforehand; they can be valuable for supporting insurance claims or any post-disaster tax breaks.

Ideally, all property should be recorded, but at the very least, any high-cost items need to be documented such as art, furniture, jewelry and the like. The IRS has helpful disaster-loss workbooks in Publication 584 to help build a list of personal and business property.

3. Check for Fiduciary Bonds

If taxpayers are employers who use a payroll service provider, they should determine if the provider has a fiduciary bond in place. Such a bond can help protect them if the payroll service defaults.

The IRS urges all employers to choose their payroll service providers carefully.

4. Know How to Rebuild Lost Documents

Despite a taxpayer’s best efforts to protect documents from the elements, the loss of some documentation to in a natural disaster is always possible. Reconstructing records may be the only way forward after a hurricane, enabling the taxpayer to get federal assistance or an insurance reimbursement.

The first step in the reconstruction process is a visit to the IRS Reconstructing Records webpage. This page includes a helpful list of procedures with the links to necessary forms and more. Some of the topics covered include business and personal loss, vehicles, tax records and how to figure a loss.

5. The IRS Can Help

Once a disaster declaration is issued by FEMA (Federal Emergency Management Agency), the IRS can postpone some deadlines for filing and paying taxes. This typically occurs for taxpayers within an officially declared federal disaster area. In this case, there’s no need to call the IRS to request the relief. IRS systems will read the address of record for the taxpayer or business and adjust the measures accordingly.

Disaster-impacted taxpayers, businesses and others with disaster tax-related questions can call the IRS at 866.562.5227 to speak with a specialist who is trained to handle disaster-related issues. Those who live outside the disaster area, but also were impacted by the storm, can also call the number to determine if they qualify for disaster relief and to get available options.

The IRS Around the Nation webpage has disaster assistance and emergency relief details for individuals and businesses. And to Build a Kit of emergency supplies, check out FEMA’s Prepare for Disasters webpage.

Other helpful resources include:

  • Publication 547, Casualties, Disasters, and Thefts
  • Publication 583, Starting a Business and Keeping Records
  • FS-2017-11, Reconstructing Records After a Natural Disaster or Casualty Loss
  • Small Business Administration
  • DisasterAssistance.gov
  • Ready.gov

Sources: IR-2022-102; FS-2017-11; “Hurricanes,” Ready.gov

Story provided by TaxingSubjects.com