According to the IRS, a few simple steps can help taxpayers and businesses protect financial and tax records in case of hurricanes and other disasters. “With forecasts calling for an active Atlantic hurricane season, the IRS encourages taxpayers to protect tax and financial documents that can be hard to replace," IRS Acting Commissioner Kevin M. Brown said. "A little planning can help safeguard valuable information in case a hurricane or other disaster strikes."

Below are some of the IRS's tips for individuals and businesses on maintaining financial and tax records:

Paperless Recordkeeping. An outstanding way to secure financial records is to receive bank statements and documents by e-mail. Important tax records, such as W-2 forms, tax returns, and other papers, can also be scanned into an electronic format. Taxpayers who have all financial records in electronic format can periodically copy their records onto a "key" or "jump drive" and send them to a relative in another city for safekeeping in case the taxpayer's normal computer backup systems are destroyed. Taxpayers can also copy files onto a CD or DVD.

Documenting Valuables. In order to recall and prove the market value of items for insurance and casualty loss claims, taxpayers can photograph or videotape the contents of their houses, especially items of great value. The photos or videotape should be stored with a friend or family member who lives away from the geographic area at risk. IRS Publication 584, a disaster loss workbook that can help taxpayers compile a room-by-room list of belongings, is also available.

Fiduciary Bonds for Payroll Services. Employers who use a payroll service provider should ask the provider if it has a fiduciary bond in place. The bond could protect the employer in case the payroll service provider defaults.

Updating Emergency Plans. Taxpayers should review emergency plans annually. Individual taxpayers should save documents that everyone should keep, including W-2s, home closing statements and insurance records, among others. Employers who hire new employees and companies or organizations that change functions should update their plans and inform their employees of the changes.

IRS Assistance. Immediately after a casualty, taxpayers can request a copy of a return and all attachments, including Form W-2, by using Form 4506, Request for Copy of Tax Return. Taxpayers who need information from their return can order a free transcript by calling 1-800-829-1040 or using Form 4506-T, Request for Transcript of Tax Return. Transcripts are available for the current year and returns processed in the three prior years.

Tax Guide 2008

Penalties for Underpayment or Late Returns
What happens if you don't file a tax return or pay taxes that you owe by their due date? Generally, in this situation the IRS will send you a notice hitting you with interest and penalties.   For more details, please review Penalties for Underpayment or Late Returns.

What To Expect if You Are Audited
Hopefully, this will not be an issue for you, but you should have some awareness of the IRS audit procedures. The IRS has several different levels of audits. If questions arise about your math, items seem to be omitted from your return, or your figures don't match those on your W-2s, 1099s, or 1098s, the IRS may simply request a correction or explanation by mail.   To explore this topic further, take a look at  What To Expect if You Are Audited.

Keeping Good Records
Preparing to meet your annual tax obligations is a year-round process. For example, everyone who pays taxes is required to keep accurate, permanent books and records so they can determine the various types of income, expenses, gains, losses, and other items that affect their income tax liability for the year.   To help get you on the road to better tax organization, please read Keeping Good Records.

Tax News

Online Tax Scam Alert

The Internal Revenue Service recently alerted taxpayers to the latest versions of an e-mail scam intended to fool people into believing they are under investigation by the agency's Criminal Investigation division or "Fraud Department."   To learn more about this problem, please read IRS Warns Taxpayers of New E-Mail Scams.

New Tax Laws Enacted

After months of political wrangling, Congress has passed a small business tax incentives bill coupled with an increase in the federal minimum wage. The Small Business and Work Opportunity Tax Act of 2007 (2007 Small Business Tax Act), signed into law on May 25, 2007, is part of a much larger and more controversial bill, H.R. 2206, U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act of 2007. The 2007 Small Business Tax Act targets nearly $5 billion in tax incentives, principally to small businesses. It also includes tax incentives to help taxpayers recovering from Hurricane Katrina, as well as an important package of S corporation reforms. However, revenue raising provisions totaling nearly $5 billion mean more taxes for certain taxpayers, especially familes with children.   To learn more about this recent development, please read New Tax Laws Provide More Pain than Pleasure.

Post-filing Retirement Planning

For many taxpayers, the 2006 tax season was extended beyond the April 17 filing deadline for a variety of reasons. If you're a calendar year taxpayer that filed IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, for an automatic six-month filing extension, you have until October 15, 2007, to file your required tax forms. While many of the planning opportunities for tax savings for 2006 ended as of the April 17 filing deadline, if you are self-employed and have a Keogh retirement plan in place, you still may be able to take advantage of deductions for contributions to a retirement plan for the 2006 tax year.   To learn more details, please read Tax Extensions Still Allow for Retirement Planning Opportunities.

Planning for Next Tax Season

Mercifully (or unmercifully), this year's April 17 tax deadline has come and gone. Unfortunately, the same cannot be said for our continuing obligations as taxpayers. With another tax filing season less than a year away and while your psychological scars are still fresh, please consider these lingering tax-related issues.   For more on this story, please look at Prepare Now for Next Year's Tax Season.


Tax News Archive

For more news stories and features on federal, state and payroll tax issues and how they may affect you, read the listing of articles in the archive.

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