Tax Tip of the Week
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Take precautions for disaster
For the week of
October 8, 2001
Following the September 11 terrorist attacks, President Bush declared five New York
boroughs and Arlington County, VA as federal disaster areas. Another 36 federal disaster areas have been declared
so far this year. If you suffer losses from a casualty, you may be able to claim a tax deduction. But how will
you prove your losses to the IRS?
Devise a plan to prove your losses.
Returns that claim casualty losses are subject to a higher audit risk. That should motivate you to devise a plan
to prove your losses. Here are some ideas:
- Take photos or videos of your property now so you'll be able to demonstrate its
condition and existence.
- Periodically take a physical inventory. Your insurance agent can provide you with
worksheets for this purpose.
- Keep receipts for major purchases.
Protect your records. Even if you keep
meticulous records, it's possible that all your records could be destroyed. Scan or make photocopies of important
receipts. Make backup copies of computer records. Get duplicates of photos and videotapes. Store these copies in
a protected off-site location, such as a safe deposit box or send copies to a family member who lives in a different
location.
Look for gaps in your insurance coverage.
You may be able to take a tax deduction for an uninsured loss, but it won't make up for your financial loss. While
it's impossible to insure against every contingency, evaluate your policies periodically to determine whether your
critical needs are covered. For example, policies that provide for "market value" coverage may not pay
you enough to replace your damaged, destroyed, or stolen property.
Take tax and financial precautions for disasters. Contact your insurance
agent or our office for more information.
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tax tips.
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provide useful tax information. Return to this site every week for helpful tax-cutting suggestions, tax reminders,
and current tax information.
The information contained in this site is of a general nature and should not be acted upon in your specific situation
without further details and/or professional assistance.
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