6 Tax Tips After a Disaster
After a disaster, fire or other major loss, bills and expenses can pile up quickly. The time after a disaster is difficult – even more so when you have financial issues looming.
Luckily, there are some IRS forms you can complete to receive immediate help and possibly get additional tax relief over the next few years.
WHN TIP – Affected by a Federal Disaster? Tax filing deadlines may be adjusted to accommodate affected victims. The IRS also has a page dedicated to providing tax relief information for the most recently affected storm and disaster victims. The IRS’s Tax Relief in Disaster Situations section and Publication 547 give useful information.
Here are some top tax prep tips from tax preparers and specialists:
1. Do first things first. Document the damage – take photographs, keep receipts and write down all the details and events that happen after the major disaster, fire or loss. The Home Inventory Lists and Easy Guide to a Home Inventory articles can help you document your possessions.
According to H&R Block, “this will be helpful in calculating the amount of your loss and may also prove beneficial to take photos showing the condition of the property after it is restored or replaced.”
WHN TIP – Had Significant Damage? Read 4 Tips for Spotting and Documenting Storm Damage.
2. Make an appointment to meet with a tax preparer. “Anybody who’s involved in a disaster should see a tax preparer for the intricacies of the forms,” says Glen Wielandt, Vice-President of Operations for Roni Deutch Tax Center Franchise.
Tax codes change frequently so it is best to meet with a well-trained tax preparer to help with the extra forms you’ll need to complete.
WHN TIP – Recoup the Costs: If you’re worried about the tax preparer’s fee, you’ll usually recoup the costs through the tax refunds you’ll receive.
3. Assess the value before and after. Before your meeting, assess your home’s fair market value before and after the disaster. “It’s important to find out the fair-market value of your home before the casualty and after of the casualty,” says Wielandt. “This is critical right now because home prices are going down.”
If your home was destroyed, find out the value of the land. Why? Property is valuable as well. Talk to local real estate offices and local realtors. They may be able to help with assessments.
4. Bring key documents. When you go to your meeting, bring:
- Social Security Card
- Photo ID
- Insurance claims and reimbursement records
- FEMA claims and reimbursement records
- SBA claims and reimbursement records
- Police reports (if you have one)
- Receipts for expenses after the disaster (anything goes – clothing, hotel bills, restaurants, expenses incurred as a result of missing work, child care, etc.)
- Previous tax records. If you have a fire and you lose all your paperwork, you’ll need to get copies or transcripts of tax records from the IRS,” says Wielandt. Ask your tax preparer what forms to fill out to get your paperwork. According to H&R Block, the IRS will waive fees and expedite requests for copies or transcripts of your federal tax return.
- Inventory list of all the items that were damaged by the disaster or fire.
WHN TIP – Appreciation vs. Worth: Worth: This is the value of each item you own. Many people either undervalue or overvalue their items. Appreciation: If you buy a television for $1,000, it’s not going to be worth a thousand dollars the next year. The tax preparer can help you with that.
5. Ask the right questions. When at the tax preparer’s office, ask about options for your refund and which ones might be more beneficial for you. According to Wielandt, you may be able to carry the refund forward over the next 20 years, giving you future tax relief, or you might be able to carry the refund back two years, which would amend your old tax return, thus giving you an immediate refund.
WHN TIP – Big-ticket Receipts: “When you purchase a big-ticket item, keep the invoice or receipt, take a picture of the item and add it to your home inventory list. That proof becomes important after a disaster or fire.” Glen Wielandt
6. After the meeting, plan ahead. “Usually we don’t think ahead, we think behind,” says Wielandt. You can always schedule another meeting to complete necessary business.