Disaster happens: Advice for getting back on your feet in the aftermath
Natural disasters strike somewhere every day. Whether it's a natural disaster like the floods that hit Pennsylvania in the fall the past few years, fire, or some other disaster, many people don't know what to do to recover, physically or financially.
Once you and your family are safe, you'll have to start thinking about what comes next. Here are some tips on how to be prepared for a disaster financially as well as some guidance if disaster does strike.
Protecting your assets
There are steps you can take to make sure you're prepared to make a claim. For example, make a video of every room in your home and give special attention to valuable items, tools, jewelry and family heirlooms. Keep a separate written list of these same items in a waterproof box or safe deposit box at a financial institution.
Also, know your insurance coverage, including any deductibles, in detail. Have contact information and policy numbers stored in a safe place. Consider establishing a list electronically "in the cloud" so that you can access it regardless of the condition of your home or office.
After a disaster, listen to the appropriate authorities and do not re-enter your home or place of business until you're told it's safe to do so. Cleanup can be hazardous. Don't work in or around damaged buildings until they've been examined and certified as safe.
Picking up the pieces
If you have homeowner's or renter's insurance, you'll begin the process of assessing the damage and filing a claim. You'll need to prove what you lost and the value of that loss. Here are some steps for reconstructing records and determining the monetary value of your possessions:
Gather all policy numbers and insurance company contact information. Talk to your insurance company about how your claim will be processed. File all claims as quickly as possible.
Make a list of damaged property. If possible, photograph or record the damage.
If you have a predisaster inventory list, compare the damaged items to the list. If you don't have a predisaster list, do your best to create one from memory.
Collect any available receipts, canceled checks, credit card statements and invoices to help determine the value of your damaged or destroyed possessions. You can use a Blue Book or online guide or consult with a car dealer to determine the current value of your car if it's been damaged. In addition, you may be able to obtain some of your financial information from your bank and credit card company websites.
Determine the value of your home by contacting your county assessor for property tax records.
If you need copies of tax returns, file Internal Revenue Service (IRS) Form 4506, Request for Copy of Transcript of Tax Form.
Small losses may be handled by providing the insurance company with a written estimate for the repairs or replacement. Larger losses will likely be handled by a claims adjuster from the insurance company. Take notes as you work with the adjuster and follow up in writing. You want to make sure that your settlement is fair.
Finding financial aid
If your area was declared a federal emergency or disaster area, contact your local Federal Emergency Management Agency to see if financial help is available. FEMA offers assistance in the form of grants, loans and other services.
Another option for financial relief is the U.S. Small Business Administration, which provides low-interest disaster loans to homeowners, renters, businesses of all sizes, and most private nonprofit organizations. SBA disaster loans can be used to repair or replace items damaged or destroyed in a declared disaster.
Watching out for fraud
In the wake of a disaster, be particularly vigilant that you don't become the victim of fraud or scams. When people are at their most vulnerable, there are some unscrupulous people who will take advantage of their situation.
Be on the lookout for websites claiming to offer aid. Research any organization before working with it, providing it with personal information, or even sending in a donation to help others.
Sometimes scammers show up on your doorstep, offering a great deal to help you rebuild, remove floodwater, fix your roof and so on. While it's tempting to get started on repairs, check out a company's credentials first. And never make payments until you're sure you're working with a reputable business.
When you're ready to start repair work, get estimates from more than one licensed, bonded, reputable contractor. Call your local Better Business Bureau to check out potential contractors. Get a written contract that specifies the scope of work, when work will begin, cost and payment schedules, and materials to be used. Don't make a final payment until the job is finished to your satisfaction, and don't sign over an insurance settlement check to the contractor.
Disaster tax relief
Special tax law provisions may help taxpayers and businesses recover financially after a disaster, especially when the federal government declares their locations major disaster areas. Depending on the circumstances, the IRS may grant additional time to file returns and pay taxes. Individuals and businesses in a federally declared disaster area can get a faster refund by claiming losses related to the disaster on the tax return for the previous year, usually by filing an amended return.
IRS Publication 2194, Disaster Losses Resource Guide, helps individuals claim casualty losses on property that was destroyed by a natural disaster. The guide contains tax forms needed to claim a casualty loss. It also answers common questions like how to extend the time you need to file, how you can receive free tax services and how to identify which disaster losses to claim.
A CPA can help
Whether you've recently experienced a disaster or would like to put plans in place should a future disaster strike, consider working with a CPA. A CPA can help you analyze your damages, tax situation and financial recovery needs.
If you have questions about your personal financial planning or need help finding someone to assist you, talk to your financial adviser. To find a CPA in Pennsylvania by location or area of expertise, visit www.ineedacpa.org.
For more information about Pennsylvania Institute of Certified Public Accountants (PICPA), visit www.ineedacpa.org.