Due to the recent flooding in southeast Michigan, many businesses and individuals may be facing the loss or destruction of tax records. In the event of an IRS examination, the burden is on the taxpayer to prove any deductions claimed. In this case, a taxpayer may reconstruct and substantiate expenses with copies of bank statements, credit card statements, cancelled checks, receipts, invoices, an itemized list prepared by your tax preparer, or credible testimony. Many times, your taxpayer will have copies of the detail used to prepare the tax return as well.
To avoid any future loss of records due to flood or fire, it's an excellent idea to keep records in a fire and water proof storage container and/or to scan any key documents and records and save them electronically.
If you're interested in discussing an emergency preparedness checklist, contact your local UHY LLP professional.