We live in Northern Arizona where the threat of fire, flood, and other disasters is always present. As such, there is an increased need for having your tax records safeguarded.
You always want to keep your tax returns in the state of Arizona for four years. The federal government can audit your tax returns for three years after they are submitted, and the state of Arizona has four years to audit your returns. Therefore, you always want to be sure you have four years of tax returns readily available. In our day and age, it is wise to create a backup set of records electronically. You can scan items and put them on a disk or a CD. Sometimes it is wise to keep a set of records in a safe deposit box or offsite.
If you run a business, it is very wise to keep a set of books offsite on a backup disc or CD. It is a nightmare to lose a year or more worth of books in your business. Some businesses do not keep any backup of the records, and that is not a wise practice. First and foremost, please back up your books and records, then you can establish an offsite program.
You always have a certain number of important documents in your possession. We suggest you get a safe deposit box, or at the very least, a fireproof box that can be put in an out of the way place in your house that is still easy to get to. You want to be sure that when you are faced with an emergency, all of your most important things are in this box and it is easy to grab on your way out the door.
A tip for preserving the value of a lost home for tax deductions is a picture log or a video log. If you are audited on a tax return that includes a large loss, you are going to have to prove market value of the contents. One of the ways that you can prove market value is through a video log or a picture log of the contents of your house.
Emergency plans and records should also be reviewed at least once a year. Particularly here in Northern Arizona, it is a good idea to have an evacuation plan in place. Always know the fastest exits from your home, always have a way to gather your important documents quickly, and be prepared to leave at any time. You do not want to be in a threatening position from trying to preserve documents or other trivialities.
What happens if you lose important documents related to your tax or tax documents? They can be recreated. You can order copies of back taxes from the IRS. If you need to order tax returns, you will need to fill out form 4506, and it will take the IRS several weeks to process your order.
You can always reorder bank statements from your bank or credit unions. You can also order back utility bills from the various utility companies, and you can order back credit card statements from the credit card companies.
The best advice that we can give in an emergency is: do not panic, but do have an exit plan, and if you do lose something, know there are professionals and agencies that can help you to recover some things. Losses can be devastating, but preserving the life and safety of yourself and your family should always be top priority. FBN
Written by Jeff Augenstein, Northern AZ Financial Services. 928-526-3999
