Reconstructing your financial records may be essential for tax purposes, getting federal assistance or insurance reimbursement after a natural disaster. Taxpayers often need certain records to prove their loss and value thereof. Accurately estimated losses may help more loan and grant money become available.
There are simple steps that can help taxpayers who have lost some or all of their records during a disaster. The following information can help taxpayers reconstruct records and prove loss of personal and/or business property.
- Obtain free copies of your tax return transcripts using the Get Transcript tool provided by IRS.gov.
- Order transcripts via phone by calling 800-908-9946.
- Taxpayers can request transcripts using the IRS2Go smartphone app.
- Get transcripts of previous years returns via mail by filing Form 4506-T (Request for Transcripts of a Tax Return).
- Request complete copies of previous returns via mail by filing Form 4506 (Request for Copy of Tax Return).
- Write the appropriate disaster designation, such as “HURRICANE IRMA,” in red letters across the top of Forms 4506-T and 4506 to expedite processing and waive the regular fee.
Personal Residence and Real Property
Real property, also called real estate, is land as well as generally anything built on, growing on, or attached to land.
- Take photographs or videos immediately after the disaster to help establish extent of damage.
- Contact the title company, escrow company or bank that handled the purchase of your home for 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 not available, home owners can usually get copies from their county assessor’s office.
- Establish a basis or fair market value of the home by reviewing comparable sales in your 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 your 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, check with the state insurance department.
- If improvements were made to the home, contact the contractors who performed the work to see if records are available. Try to get statements from contractors verifying 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 of said property taken at social gatherings.
- If there is a home improvement loan, get paperwork from the financial institution that issued the loan. The amount of the loan might help establish cost of 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 old records that might address the value of the property.
There are several resources that can help determine the current fair market value of most cars, trucks and motorcycles online and at most libraries:
You can also contact the dealer from where you purchased the vehicle for a copy of the contract. If not available, give the dealer all the facts and details, and ask for a comparable price figure. If you are still making payments on the car, check with your lien holder.
Showing the fair market value of some types of personal property can be difficult. Here are things to consider when cataloging the value of lost items:
- Pictures on mobile phones that show the damaged property before the disaster.
- Check websites that help establish the cost and fair market value of lost items.
- Support the valuation with photographs, videos, canceled checks, receipts or other evidence.
- Contact your credit card company or bank to obtain past statements for items purchased with a credit card or debit card. You can usually access such statements online.
If there are no photos or videos of the property, you can create a sketch of each room that was impacted to help remember what items were lost:
- Draw a floor plan showing where each piece of furniture was placed including include drawers, dressers and shelves.
- Sketch pictures of the room looking toward shelves or tables describing their contents.
- Take time to draw shelves with memorabilia on them.
- Be sure to include garages, attics, closets, basements and items on walls.
These do not have to be professionally drawn, just functional.
- Create a list of lost inventories by getting copies of invoices from your suppliers. The invoices should date back at least one calendar year whenever possible.
- Check mobile phones or other cameras for pictures and videos taken of your buildings, equipment and inventory.
- Get copies of bank statements for income information. Deposits should closely reflect sales 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.
- 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 spots, lights, signs and awnings.
- If the business was preexisting, contact 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.
Casualty and Disaster Tax Losses
A casualty is the damage, destruction or loss of property resulting from an identifiable event that is sudden, unexpected or unusual. If damage is to personal, income‐producing or business property, you may be able to claim a casualty loss deduction on your next tax return.
Taxpayers generally must deduct a casualty loss in the year it occurred. However, if the property was damaged as a result of a federally-declared disaster, taxpayers can choose to deduct that loss on their return for the tax year immediately preceding the year in which the disaster happened. A federally-declared disaster is a disaster that took place in an area declared by the President to be eligible for federal assistance. Individual taxpayers can amend their tax return by filing a Form 1040X (Amended U.S. Individual Income Tax Return).
Taxpayers may need to reconstruct records to prove loss and the amount thereof. Determine the following figures to calculate loss:
- Decrease in fair market value of the property that resulted from the casualty or disaster.
- Adjusted basis of the property – this is generally what was paid for the property, increased or decreased, because of certain events.
Taxpayers may deduct the smaller of these two amounts, minus insurance or other reimbursement. Additionally, certain deduction limits apply. See Publication 547 (Casualties, Disasters and Thefts) for details on these limits and Publication 551 (Basis of Assets) for additional information.
If the casualty loss deduction causes a taxpayer’s deductions for the year to be more than their income for the year, there may be a net operating loss. For more information see Publication 536 (Net Operating Losses (NOLs) for Individuals, Estates and Trusts).
Determining Decrease in Fair Market Value
Fair market value (FMV) is generally the reasonable price for which the property could be sold. The decrease in FMV used to figure the amount of a casualty loss is the difference between the property’s FMV immediately before and after the casualty. Without a competent appraisal, the cost of clean-up or repairs is acceptable under certain conditions as evidence of the decrease in FMV.
Generally, the cost of cleaning up or making repairs if the repairs are:
- Actually made
- Not excessive
- Necessary to bring the property back to its pre-casualty condition
- Only made to repair damage
- Not adding value to the property or making it worth more than before the disaster occured
For more information on losses, see these IRS publications:
- Publication 547 (Casualties, Disasters, and Thefts): Information on figuring your casualty loss deduction.
- Publication 584 (Casualty, Disaster, and Theft Loss Workbook): Helps individuals list stolen or damaged personal-use property and figure loss. It provides a room-by-room listing to help create an inventory and figure loss on the home and contents plus motor vehicles.
- Publication 584-B (Business Casualty, Disaster and Theft Loss Workbook): Helps businesses list stolen or damaged business or income-producing property and figure loss.
Resources for Assistance and Additional Information:
- IRS Disaster Assistance Hotline: 866-562-5227 – Monday through Friday from 7 a.m. to 10 p.m. local time
- Publication 2194 (Disaster Resource Guide for Individuals and Businesses)
- Publication 583 (Starting a Business and Keeping Records)
- Tax Relief in Disaster Situations
- Federal Emergency Management Agency
- Small Business Administration