DISASTER VICTIMS SHOULD DOCUMENT LOSSES BEFORE CLEAN-UP BEGINS
From the National Association of Enrolled Agents (NAEA)
Residents in the Presidential Disaster Areas who
suffered any type of business or personal property damage due to Hurricanes
Katrina, Rita or Wilma should carefully document losses for insurance and
tax purposes.
The required documentation process does not need to be
difficult, according to the National Association of Enrolled Agents.
Residents and business
owners are advised to photograph and inventory any property damaged or
destroyed during the storms before cleaning or throwing articles away. Be
sure to photograph the inside and outside of the house or business and as
much personal property damage as possible.
“It is very important that people take pictures or
videotapes and do a complete inventory of damage before the mess gets
cleaned up,” notes Carol W. Thompson, EA. She continued, “My experience
tells me that a month from now, people are not going to remember what they
threw away.”
To organize a written inventory, Thompson recommends IRS
Publication 584, “Casualty and Disaster Loss Workbook.” She describes the
booklet as “wonderfully helpful” in conducting a room-by-room inventory of
damage. The workbook may be obtained by calling the IRS at 800-829-3676,
or by visiting the IRS website at
http://www.irs.gov/pub/irs-pdf/p584.pdf.
A disaster loss is tax deductible to the amount over any
insurance reimbursement, with three limitations: a deductible of $100 must
be subtracted, the total loss must exceed 10% of the taxpayer’s adjusted
gross income, and losses are listed as an itemized deduction.
NOTE: Taxpayers located in the Presidential Disaster Area have
the option of claiming their casualty loss deduction on their prior year
returns (2004) by filing amended returns. This procedure can
generate a refund of prior-year taxes within a few weeks.
Details of the various tax breaks available for taxpayers in the
various 2005 hurricane disaster areas is available from the IRS at
http://www.irs.gov/newsroom/article/0,,id=147085,00.html.
For detailed information on claiming a casualty loss tax
deduction, see IRS Publication 547 on the IRS website at
http://www.irs.gov/pub/irs-pdf/p547.pdf.
Tax deductions for buildings with structural damage
require a qualified appraisal and records of the repairs to restore the
building to its previous condition.
Thompson cautions that all claims for damage must first
be submitted to the property owner’s insurance carrier, even if the
property is not covered, in order to take a casualty loss deduction.
Georgia taxpayers who need help with storm damage tax issues
Click Here.
The NAEA also has made available a list of suggestions
for the reconstruction of needed personal and business records lost in the
flooding:
Record Reconstruction Information.
Also available is as a step-by-step guide to
safeguarding important records before a disaster occurs:
Create a Disaster Evacuation
Box.
