In the wake of severe storms or other natural disasters, the cleanup can be a monumental task. One of the most important tasks to be undertaken is reconstructing financial records that were lost for insurance reimbursement or to get federal disaster assistance.
The following are steps you can take after a disaster to reconstruct these records:
Copies of returns or return transcripts
Taxpayers who have lost copies of their tax returns in a disaster can obtain return transcripts from the IRS. Return transcripts show most line items from an original Form 1040 tax return, along with any forms and schedules. The IRS provides return transcripts for the current and three prior tax years. Please note that a return transcript does not show changes made after the original return was filed.
A tax return transcript usually meets the needs of lending institutions offering mortgages. Taxpayers who need return transcripts can get them by:
- using the IRS Get Transcript tool;
- calling the IRS at 800-908-9946;
- mailing to the IRS Form 4506-T, Request for Transcript of a Tax Return; or
- checking with their CPA for a copy.
When filing Form 4506, Request for Copy of Tax Return, please note that the primary spouse on a joint return must make the request when getting copies of returns by mail or by phone.
When requesting returns or return transcripts by mail, be sure to write the appropriate disaster designation, for example, “HURRICANE IAN,” in red letters across the top of the form to expedite processing and waive the normal user fee.
Personal residence and other real property records
Homeowners and other real property owners may need to recreate records to document the extent of the damage to their property.
The following are some steps property owners should take to show property damage after a disaster:
- 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 property to get copies of appropriate documents. Real estate brokers may also be able to help depending on how long ago the property was purchased.
- Use the current property tax statement to determine the value of the land and any improvement on the property. If the taxpayer has lost their property tax statement a copy can usually be obtained from the county assessor’s office or the county’s tax assessor website.
- 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. For details on how to reach the insurance company, a taxpayer should check with their state insurance department.
- If improvements were made to the home, contact the contractors who did the work to see if they have records available. If possible, get statements from the contractors verifying the work and what it cost.
- 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.
- If no other records are available, check the county assessor’s office for records that might address the value of the property.
We recommend that property owners, especially those in disaster-prone areas, take pictures or videos of their property at least once per year so they have relatively recent proof of the state of their property before any disaster damage. We recommend taking pictures of all the rooms in your home as a visual inventory. Don’t forget to take pictures of the insides of cabinets, pantries, closets, crawl spaces, attics and garages. Be sure to check whether your insurance provider allows these photos and videos to be uploaded to a remote storage server.
There are several resources that can help determine the current fair market value of most cars on the road. These resources are all available online and at most libraries:
Additionally, you can call the dealer where you purchased the lost or damaged vehicle and ask for a copy of the purchase contract. If the contract is not available, the dealer may be able to provide both a before- and after-disaster fair market value for the vehicle. Be sure to check with the lien holder if you are still making payments on the car.
Other personal property
It can be difficult to reconstruct records showing the fair market value of some types of personal property. Generally, when computing a disaster loss the taxpayer must determine:
- The decrease in fair market value of the property that resulted from the casualty or disaster.
- Their adjusted basis of the property. Generally, this is what was paid for the property, increased or decreased, by certain events.
Here are some things to consider when cataloging lost or damaged personal items and their pre- and post-disaster 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 or damaged 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 users 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:
- Draw a floor plan showing where each piece of furniture was placed, including dressers and shelves.
- Sketch pictures of the room looking toward any shelves or tables showing their contents.
- These do not have to be professionally drawn, just functional.
- Take time to draw shelves with memorabilia on them.
- Be sure to include garages, attics, closets, basements and items on walls.
Check to see if you have an app on your phone that helps create and maintain a home personal property inventory. Your property insurer may be able to recommend an app for home inventory. Your property insurer may have recommendations for a home inventory app as well.
Please let us know how we can help.
Pat Herrera, EA, is a Supervisor on our Client Service Team. She can be reached at email@example.com.