Protecting Your Tax Records from Natural Disasters

By Alan L. Olsen, CPA, MBA (tax)
Managing Partner
Greenstein, Rogoff, Olsen & Co.
Posted: 6/15/11

“This is not a test. Please evacuate.” Over the past three months our world has faced many natural disasters including fierce earthquakes, deadly tornadoes and record breaking flood waters. Although the next natural disaster location is unknown, are you prepared if it strikes close to home?

When preparing for disasters, it’s common to focus on the necessities of life: 72 hour kits, flashlights and first aid supplies. However, many overlook the need to keep their tax and financial records safe from earthquakes, storms and tornadoes. In the aftermath of a disaster, life would be easier to put back together if you didn’t have to worry about records that were lost forever.

The IRS can audit tax returns that are six years old, so it is wise to keep tax and financial documents up to six years old in a secure location. The file cabinet may not be the best solution if your home is flooded or destroyed in a tornado, so what is an alternative? It is important to keep an electronic copy of all tax records. This is a safe way to back up and preserve your tax records from natural disasters. There are several options for keeping records electronically. You can store tax returns and supporting documents on your hard drive and simply email them to yourself, or use an online database to store your documents. In the event of a disaster, if your computer is destroyed, you will still be able to access your records from the internet. Make sure to password protect your files to keep them safe from identity theft.

What records should you keep? Tax returns, property records, deeds and year-end financial statements are just a few documents that you should store. For a more complete list of records to keep, see the Tax Record Retention Guide.

Be aware that the IRS will not be unreasonable if a disaster strikes. With the recent Mississippi floods, the IRS postponed certain deadlines for taxpayers and businesses in flood areas [2]. If you are ever in a disaster situation, there is a good chance that tax deadlines will be extended.

Start preparing for natural disasters by protecting your tax and financial records today. For more ideas on how to protect your financial records from disasters see http://www.irs.gov/.

[1]http://earthquake.usgs.gov/earthquakes/recenteqsww/Quakes/usc0001xgp.php
[2] http://www.irs.gov/newsroom/article/0,,id=239343,00.html
Prepare for Hurricanes, Disasters by Safeguarding Tax Records. 2 June, 2011. http://www.irs.gov/.

*You may also view this article on GROCO's Tax Ninja Blog at www.grocotaxninja.com