Rebuilding Your Records
Perhaps you had a disaster in your office. Maybe your recordkeeping has been damaged, corrupted, flooded, or some other catastrophe is keeping you from having the records you need defend your deductions in the event of an audit. Below are some tips on how you can rebuild this information with legitimate sources to document the best you can if you’re examined.
Check Your Online Backups
Unless you keep everything on paper and never use accounting software, it’s likely that much of your critical tax and financial data is already backed up online in the “cloud.” For example, your accounting software may perform online backups automatically without you even being aware of it.
Indeed, everything stored on your business computer (and home computer) may be backed up online.
Online data backups are impervious to local and even national disasters because the data is stored electronically in many locations on the internet.
Replacing Important Business Records
If you don’t have online or paper copies of the following types of records, you’ll have to obtain copies from whoever has them. Some of these (your business insurance policy, for example) may be easily available online. Other records may take more effort to replace.
Tax Records
You may have electronic copies of your tax returns stored in the cloud, ready to download. If not, contact the tax professional who prepares your returns. He or she should have copies of the returns prepared on your behalf.
You can also get copies of your previous tax returns and transcripts from the IRS.
IRS tax transcripts are not copies of your filed returns. Rather, they contain data from the key parts of the return. IRS transcripts are free, and you can get them anytime by using the IRS Get Transcript online tool; by postal mail with IRS Form 4506-T, Request for Transcript of Tax Return; by calling the IRS at 800-908- 9946; or through the IRS2Go mobile phone app.
Business Mileage Records
Ideally, you have an electronic mileage log (there are many mileage apps), so a record of your business mileage is online.
If not, and if your paper mileage log was destroyed, you can use your appointment book or calendar and online map tools to reconstruct your business mileage.
The mileage log is another difficult record to reconstruct, because you need not only the mileage number but also the business purpose for each trip (something that is often missing from the online apps).
Final Thoughts
Reconstructing records can be a tricky thing, and it is important to be honest if you are examined that the records have been reconstructed. That said, it is still a vitally important to make sure you have the best records possible in the event you’re examined, and that the records are created BEFORE the IRS reaches out to you. If you’d like to talk more about the dos and don’ts of recordkeeping, click here for a one-on-one conversation.
