Reconstructing Records Following a Disaster Event by Adam Cohen, CPA
Posted on January 03, 2019 by Adam Cohen
Taxpayers affected by disasters, such as fires, floods or hurricanes, may need to reconstruct their records to prove they suffered losses for tax purposes and to qualify for federal assistance and insurance reimbursement. Following are some resources to help individual obtain copies of documentation that they may have lost as a result of a disaster event.
Proof of Loss. Losses sustained in certain disaster situations may qualify for insurance reimbursement when an active policy is in place. Alternatively, taxpayers may qualify to deduct unreimbursed losses on their federal income tax returns. As soon as possible after a disaster strikes, taxpayers should take photographs and narrate a video recording the extent of the damages to their property.
In an ideal world, individuals will already have a cloud or digital back-up of receipts as well as a photographic and video inventory of all of the assets they own, from highly valued jewelry to common household appliances. Such digital documentation is critical for proving ownership and demonstrating the fair market value of property at the time of the loss. If taxpayers did not keep these records in a safe place, they may be able to find photographic evidence of the assets on their phones. Purchases taxpayers made by credit or debit card may be available online or by contacting their financial institutions directly.
Property Records. Taxpayers must demonstrate that they own property and provide some evidence of the property’s value before it sustained damage. When a loss involves a car, taxpayers can obtain the auto’s fair market value by going online and looking it up on Edmunds or Kelly’s Blue Book.
For real estate, taxpayers may contact the title company, escrow company or bank that handled the purchase of their home to get copies of appropriate documents. If the taxpayer received the property as a part of an inheritance, he or she can check court records for probate values or contact the attorney who handled the decedent’s estate. When no other records are available, taxpayers can check the county assessor’s office to find records that address the property’s value.
If taxpayers made improvements to their homes, which in turn improved the property’s value, they may contact the contractors they worked with in order to obtain statements verifying the cost of the work. As a last resort, taxpayers can request that their friends and relatives provide written statements describing the home before and after the improvements were made.
Prior Year Tax Returns
It is recommended that taxpayers hold onto their tax returns for a minimum of seven years since the IRS can go back six years to audit a return in which the agency presumes a taxpayer omitted income. However, there is no statute of limitations when the IRS proves that a taxpayer filed a fraudulent return.
While individuals can often receive copies of their most recently filed returns by contacting their tax accountants, a better option may be to visit the IRS website or call the agency at 800-908-9946 to can get free copies of their tax return transcripts.
About the Author: Adam Cohen, CPA, is an associate director of Tax Services with Berkowitz Pollack Brant, where he works with closely held businesses and non-profit charities, hospitals and family foundations to maintain tax efficiency and comply with federal and state regulations. He can be reached at the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or via e-mail at firstname.lastname@example.org.