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.
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.
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.
Richard L. Lipton CPA & Associates LLC,located in Florham Park, N.J., draws on its founder’s 10 years as a stockholder and manager of family-owned Sam’s Tire Co. in Paterson, N.J.
Richard L. Lipton CPA & Associates LLC “is structured to personally serve large and small clients who have a need for business consulting services as well as accounting and tax services. We have even developed aniche in the area of forensic accounting. Our clients have realized that this combination of skills is extremely valuable in providing the highest quality professional services in today’s and the future’s economy.” – Richard L. Lipton CPA