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Do
you have accessible backup
of your tax information and
documentation in the event
of a natural disaster, or if
a theft occurs? Carefully
organize receipts and other
documentation that may
substantiate deductions and
credits on a tax return.
Scan paper records and
documentation, and copy them
onto a USB drive, CD or DVD.
Store these in safe spot
like a bank safety deposit
box or with relatives for
safekeeping. The IRS
Publication 584, Casualty,
Disaster, and Theft Loss
Workbook, provides guidance
on how to document your
items in a room-by-room log,
as well as the tax
regulations for casualties,
disasters and thefts.
Declaring casualty and theft
losses can be a confusing
process. Taxpayers must
declare casualty losses in
the year they suffered them
unless they are in an area
determined by the President
to warrant federal disaster
assistance. Those suffering
property losses in the areas
declared federal disaster
areas during 2008 may amend
their 2007 tax return to
take the loss. This action
will enable them to get the
refund sooner since they do
not have to wait until the
2008 tax return is filed.
Federal aid and loans may
also be available for
residents and businesses in
those areas.
Casualty and theft losses
for personal property can be
claimed as the result of
destruction from
unanticipated weather events
such as wildfires,
hurricanes, tornadoes, or
from burglaries and
break-ins, by filing Form
4684, Section A, Casualties
and Thefts. If the property
is not completely destroyed,
determine the loss by
figuring the decrease in
fair market value minus any
insurance reimbursements.
Then subtract another $100
for each casualty or theft
that occurred during the
year. A total of all
casualty and theft losses
must be further reduced by
10% of the taxpayer’s
adjusted gross income. These
limits do not apply to
business and income
producing property, such as
rental property, which is
claimed on Form 4684,
Section B. Taxpayers who
have incurred property
losses, should file
insurance claims promptly.
Only those losses that are
not covered by insurance
should be claimed on Form
4684.
If the property is rental
property, or other
business-producing property
that is completely
destroyed, the deductible
casualty loss amount is the
adjusted basis in the
property minus insurance or
other reimbursement. If the
property isn’t completely
destroyed, the deductible
casualty loss is the lesser
of either the decrease in
the fair market value, or
the adjusted basis of the
property before the loss.
Renters may qualify to
declare a casualty loss for
damaged furniture and
property in their residence.
If you have any questions or
we can assist you in
safeguarding your records,
please call Liberty Tax
Service at 724-863-4447.
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