Backing Up Tax and Financial Records

Last week, the IRS published a couple of news alerts with language encouraging tax payers to create backup records of tax and financial documents in case of natural disaster. Backing up any essential data, like tax records, banking transactions and insurance information, is just good sense, and the IRS agrees. You can greatly reduce the risk of complete loss of critical information by consistently storing copies of essential documents.

Many Americans have fire-safe boxes, emergency kits and even small safes that they use for deeds, titles, birth certificates and other important papers. If you don't have such a box or other measure in place to safekeep your essential documents, you should consider it. And, with small, inexpensive USB drives readily available, and digital versions of most documents, there is no reason not to safeguard your critical information.

Things you may want to store in your safe box/USB drive:

Copies of insurance policies, copies of tax returns in PDF format, a filled-out copy of Publication 584, Casualty, Disaster and Theft Loss Workbook, and for small business owners, the Business version of this same workbook, Publication 584-B, and any other financial information that may not be easily retrievable, such as copies of paper savings bonds. You may also consider a simple text file with usernames and passwords you use for accessing online banking and other important accounts. If your computer were lost in a disaster, your "log in" file would help you regain access to important online accounts.

Additionally, small business owners should have backup copies of their Quickbooks files, payroll records, business insurance policies, and other critical data and documents