Hello, I’m Judy Henderson.
Today I want to talk to you about recordkeeping and reconstructing business records to help your business survive a major disaster.
Proper recordkeeping is very important when disaster strikes. There are a few steps that you can take to help you reconstruct important records when necessary.
First, try to get all financial records in electronic format
-
Use a scanner to fill in the gaps of electronic commerce
-
Then copy all your records onto a CD, DVD, or ‘jump drive’ periodically.
Whenever possible, vital records should be stored off-site - preferably with a copy in a location that is far away from your main business location. There are numerous record storage firms. Search for a reputable one that provides adequate physical security and ensures a timely response to any requests for records you may have.
Keeping photocopies of vital records at home can be a good idea. If you ever need to apply for a Small Business Administration loan to assist with recovery, you will need to provide various legal and financial forms, including:
It is important to document assets and valuables:
Now let’s talk about how to reconstruct business records.
Get copies of invoices from suppliers. Whenever possible, the invoices should date back at least one calendar year.
You will also need copies of bank statements and account receivable listings.
Obtain copies of last year’s federal, state and local tax returns including sales tax reports, payroll tax returns and business licenses (from city or county). These will reflect gross sales for a given time period.
Sketch an outline of the inside and outside of the business location. Then start to fill in the details on the sketches.
-
Inside the building - what equipment was where; if a store, where were the products and inventory located.
-
Outside the building - shrubs, parking, signs, awnings, etc.
If you purchased an existing business, go back to the broker for a copy of the purchase agreement. This should detail what was acquired.
If the building was constructed for you, contact the contractor for building plans or the county/city planning commissions for copies of any plans.
IRS assistance is available to help reconstruct records. You can request a copy of a return and all attachments (including Form W-2) using Form 4506, or request a transcript if just need information from your return by calling 1-800-829-1040 or using Form 4506-T.
Now let me tell you what happens after a disaster.
First, the governor of the affected state requests federal assistance and the president may declare a state a disaster area.
FEMA determines the types of assistance that will be made available to those areas that are affected by the disaster. evel of aid and impacted counties. FEMA may decide to provide Public Assistance grant programs, Individual Assistance grant programs, or both.
Special tax law provisions may help taxpayers and businesses recover financially from the impact of a disaster.
The IRS may grant additional time to file returns and pay taxes without penalty or interest.
Both individuals and businesses in a presidentially-declared disaster area can get a faster refund by claiming casualty losses related to the disaster on the tax return for the previous year, usually by filing an amended return.
IRS generally doesn't issue any relief unless Individual Assistance is provided, yet taxpayers can take the loss in the prior year if only Public Assistance is offered.
Casualty losses can result from the destruction of or damage to your property from any sudden, unexpected, and unusual event such as a flood, hurricane, tornado, fire, earthquake or even volcanic eruption.
Losses on personal and business property are figured differently. If your business or income-producing property is completely destroyed, your loss is the adjusted basis of the property, minus any salvage value and any insurance or other reimbursement you receive or expect to receive.
Losses from business property are claimed on Form 4684, Section B.
Under the general rules, casualty losses are deductible only in the year the casualty occurred. However, if you have a deductible loss in a presidentially-declared disaster area, you can choose to deduct that loss on your tax return for the year immediately preceding the loss year.
If you have already filed your return for the preceding year, the loss may be claimed in the preceding year by filing an amended return, Form 1040X.
If your casualty loss deduction causes your deductions for the year to be more than your income for the year, you may have a net operating loss or NOL.
You can use an NOL to lower your tax in an earlier year, allowing you to get a refund for tax you already paid. Or, you can use it to lower your tax in a later year. For more information, see Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, & Trusts.
The IRS can also postpone certain time sensitive tax deadlines of taxpayers who are affected by a presidentially-declared disaster.
The IRS programs the zip codes located in a disaster area into its processing computers so that most penalties are prevented from being assessed. If penalty notices are received by affected taxpayers who qualify for relief provisions, they should contact the IRS.
I hope the information that I have shared today will help you understand how to reconstruct your records and properly report a casualty loss.
Thanks for listening.
For the IRS, I’m Judy Henderson.
|