In the past few weeks, we’ve witnessed several extreme weather events. Hurricane Laura, the wildfires in California, and the derecho in Iowa are just a few examples of natural disasters that upend normal life for millions of people.
In response, the IRS recently released advice on disaster preparedness. Families and businesses are encouraged to make an evacuation plan, put together a supplies kit, and have financial safety measures in place.
When preparing for a disaster, protecting your financial information and valuables is just as important as planning for evacuations or sheltering in place. Financial disaster preparedness can make the difference when it comes to insurance claims or rebuilding your home.
With that in mind, let’s review what financial safety looks like:
· Plan for emergencies with your family and your business. Families should plan for evacuations and disruption to normal life. Consider what schooling may look like or how your job will change in the aftermath of disaster. For business owners this is especially important. If disaster strikes, will you be able to serve your clients and if so how? Will you and your employees be able to work remotely? What will your insurance cover? These questions are important to answer, plan for, and evaluate on an annual basis.
· Create electronic copies of your important documents. In a rush to get to safety, you may forget to protect documents like your bank statements, tax returns, and insurance policies. Keep paper copies in a safe, waterproof and even fireproof container at all times. To make for easy transport, consider scanning paper documents onto a USB flash drive or a CD. Keep this device with the to-go supplies. Another option is to keep duplicate documents with a trusted person outside of your disaster area.
· Document valuables. In the event of disaster, your valuables may be damaged or lost. In addition to written documentation, the IRS recommends taking photos or videos of valuables. The visual element makes it easier to document what was lost or damaged, and to claim insurance and tax benefits. Go room-by-room in your home to create an inventory.
· Know about tax relief. The IRS offers disaster assistance and relief for individuals and businesses. Generally, for the IRS to enact provisions the location must be made a federally declared disaster area. In that event, the IRS is able to grant additional time to file a tax return, give taxpayers more time to pay any tax due, and allow individuals and businesses to obtain faster refunds by amending the previous year’s tax return to claim disaster losses.
· Take out cash and freeze your debit cards. Take out a week’s worth of spending cash before the disaster and consider freezing your debit and credit cards. Without power, ATM machines or point of sale systems in stores may not be available and cash may be your only option to purchase supplies. In the haste to get to safety, debit or credit cards may be lost. To avoid your finances being compromised, place a temporary hold on your cards so that they cannot be used if misplaced.
As scary as it can be planning for disasters, having a strategy in place prior to weather events can give you peace of mind and help your recovery efforts in the storm’s aftermath.