It seems that this year has seen more than its share of natural disasters including devastating hurricanes and fires impacting large portions of Florida, Texas, California, and beyond. Along with property losses, many of the victims of these disasters will have lost some or all of their financial and tax records and will be faced with the daunting task of reconstructing their records so they can prove the amount of their losses from personal-use and business property. Failure to do so can cost thousands in lost federal assistance, insurance reimbursements, and tax deductions.
If you or your business experienced losses from one of these disasters, we offer our condolences for your losses. As for reconstructing your records, this letter provides some simple steps that you can take now to help get the job done. It will take some work, but it will be worth the effort in the long run. As always, please give us a call if we can help.
Tax Returns
If any of your prior year tax returns have been destroyed, give us a call. We can likely provide you copies.
Personal Residence and Real Property
If your personal residence or any other real property, such as a vacation or rental home, was damaged—
· 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, you 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 taken at get-togethers.
· 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. We may be able to help as well if you previously provided this information to us.
· If no other records are available, check the county assessor’s office for old records that might address the value of the property.
Vehicles
If your vehicle was damaged or destroyed in a disaster, there are several resources that can help determine the current fair market value of most cars on the road. Resources such as Kelley’s Blue Book, National Automobile Dealers Association, and Edmunds are all available online and at most libraries. Also, you can 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.
Personal Property
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 mobile phones for pictures 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. These do not have to be professionally drawn, just functional. Draw a floor plan showing where each piece of furniture was placed—include drawers, dressers and shelves. Take time to draw shelves with memorabilia on them and be sure to include garages, attics, closets, basements and items on walls.
Business Records
If your business experienced a loss from a disaster, you’ll need to reconstruct those records as well.
· 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. We will have copies of returns we prepared for you. If you have previously provided us copies of other returns, we may have a copy of those as well. Please give us a call.
· 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.
There you have it. It’ll take some work, but it will be time well spent. Please give us a call if we can be of assistance.
Sincerely,
Edward Brockschmidt, CPA