When Disaster Strikes: Tax Help with Records
It may be a natural disaster (hurricane, fire, tornado, flood, etc.) or man-made (criminal activity, lost or misplaced, etc.), but records have a way of disappearing. This issue comes up rather frequently (unfortunately) with respect to tax records. Many records are needed to prepare tax returns, support a claim for a tax loss or defend the returns in the event of an audit. And what happens when these records no longer exist?
The IRS recognizes that many taxpayers fall into the category of “missing or destroyed records.” They have provided some guidance on what to do if you find yourself in this situation (and a complete discussion can be found in IRS FS-2017-11 at www.irs.gov). Here is a synopsis:
Tax Records from IRS
- Get free tax return transcripts immediately by visiting the Get Transcript tool at www.irs.gov.
- To order transcripts by phone, call 800-908-9946 and follow the prompts.
- To get transcripts of previous years returns by mail, file a Form 4506-T, Request for Transcripts of a Tax Return.
- To request copies of past returns by mail, file Form 4506, Request for Copy of Tax Return.
- Write the appropriate disaster designation, such as “HURRICANE HARVEY,” in red letters across the top of Forms 4506-T and 4506 to expedite processing and to waive the normal user fee.
Personal Residence and Real Property
Real property is land as well as generally anything built on, growing on, or attached to land.
- Take photographs or videos as soon after the disaster as possible. This helps establish the extent of the damage.
- Contact the title company, escrow company or bank that handled the purchase of the home to get copies of appropriate documents. Real estate brokers may also be able to help.
- Use the current property tax statement for land-versus-building ratios if available. If they are not available, owners can usually get copies from the county assessor’s office.
- Establish a basis or fair market value of the home by reviewing comparable sales within the same neighborhood. This information can be found by contacting an appraisal company or visiting a website that provides home valuations.
- Check with the mortgage company for copies of appraisals or other information they may have about cost or fair market value in the area.
- Review insurance policies, as they usually list the value of a building, establishing a base figure for replacement value insurance.
- If improvements were made to the home, contact the contractors who did the work to see if records are available. If possible, get statements from the contractors verifying their work and cost.
- Get written accounts from friends and relatives who saw the house before and after any improvements. See if any of them have photos.
- If there is a home improvement loan, get paperwork from the institution that issued the loan. The amount of the loan may help establish the cost of the improvements.
- For inherited property, check court records for probate values. If a trust or estate existed, contact the attorney who handled the estate or trust.
- If no other records are available, check the county assessor’s office for old records that might address the value of the property.
There are several resources that can help determine the current fair market value of most cars on the road. These resources are all available online and at most libraries:
- Kelley’s Blue Book
- National Automobile Dealers Association
Additionally, call the dealer where the car was purchased and ask for a copy of the contract. If this is not available, give the dealer all the facts and details, and ask for a comparable price figure. If making payments on the car, check with the lien holder.
It can be difficult to reconstruct records showing the fair market value of some types of personal property. Here are some things to consider when cataloguing lost items and their values:
- Look on cell phones/cloud/other storage for photos that were taken in the home that might show the damaged property in the background before the disaster.
- Check websites that can help establish the cost and fair market value of lost items.
- Support the valuation with photographs, videos, canceled checks, receipts or other evidence.
- If items were purchased using a credit card or debit card, contact the credit card company or bank for past statements. Credit card companies and banks often provide user’s access to these statements online.
If there are no photos or videos of the property, a simple method to help remember what items were lost is to sketch pictures of each room that was impacted:
- Draw a floor plan showing where each piece of furniture was placed – include drawers, dressers and shelves.
- Sketch pictures of the room looking toward any shelves or tables showing their contents.
- These do not have to be professionally drawn, just functional.
- Take time to draw shelves with memorabilia on them.
- Be sure to include garages, attics, closets, basements and items on walls.
- To create a list of lost inventories, get copies of invoices from suppliers. Whenever possible, the invoices should date back at least one calendar year.
- Check mobile phones or other cameras for pictures and videos taken of buildings, equipment and inventory.
- For information about income, get copies of bank statements. The deposits should closely reflect what the sales were for any given time period.
- Get copies of last year’s federal, state and local tax returns. This includes sales tax reports, payroll tax returns and business licenses from the city or county. These will reflect gross sales for a given time period.
- If there are no photographs or videos available, sketch an outline of the inside and outside of the business location. Then start to fill in the details of the sketches. For example, for the inside of the building, record where equipment and inventory was located. For the outside of the building, map out the locations of items such as shrubs, parking, signs and awnings.
- If the business was pre-existing, go back to the broker for a copy of the purchase agreement. This should detail what was acquired.
- If the building was newly constructed, contact the contractor or a planning commission for building plans.