A sad reminder of the need to prepare for natural disasters is the one-year anniversary of the May 22, 2011, Joplin tornado. It claimed 161 lives, making it the most deadly tornado in decades, and so far its survivors have received $2.16 billion in insurance claims payouts.
According to the National Oceanic and Atmospheric Administration, $52 billion in damages resulted from natural disasters in the United States in 2011, also setting the record for the most billion-dollar disasters. It’s important to understand what documents are most important to have in your emergency kit and what to do after a disaster causes property loss or damage.
Organizing papers ‘before’ can make ‘after’ easier
The Federal Emergency Management Agency advises keeping insurance policies, deeds, property records, stocks, bonds and other critical documents in a safe deposit box. Paper copies of these documents, past tax returns and pictures/videos of valuables can be kept with disaster supplies in a fireproof, waterproof container for quick access in case of emergency. Scanning and saving these documents on a USB flash drive, CD or DVD allows for easier storage and portability.
After the storm, if you’ve sustained property damage or loss, start the claims process by calling your insurance agent. Also, consult a tax professional for guidance on what expenses generally are tax-deductible and how to claim a casualty loss on a federal tax return.
Using tax information helps get financial affairs on track
The earlier insurance claims are filed, the sooner the reimbursement process can begin and your home can be restored to its pre-storm condition. Here’s how that happens:
Insurance reimbursement information is needed to accurately calculate a casualty loss claimed on a tax return
Losses in a federal disaster area can be claimed on an original or amended tax return for the year prior to the loss to get a tax refund sooner
IRS disaster relief, in the form of extended tax deadlines, is generally offered to taxpayers in federally declared disaster areas qualifying for individual assistance
The IRS will waive the usual fees and expedite requests for copies of tax returns for people who need them to apply for benefits or to file amended returns claiming disaster-related losses
H&R Block clients – even do-it-yourself filers – can visit any office to request copies of their tax returns
Taxpayers may be able to defer taxes on any gain from insurance proceeds by replacing damaged property with a like item
Generally, property losses not covered by insurance are tax-deductible.
As well as planning what to do when tornado sirens go off and evacuation orders are issued, taxpayers should ensure they have securely stashed away the tax and other financial documents they could need after a disaster strikes. Having important tax and financial information easily accessible after a natural disaster can help survivors recover and rebuild their lives – add them to your disaster emergency kit.