Recovering Lost Business Records After a Disaster

Steps to Recover Taxes and Other Documents After a Disaster

Man storing papers in safe deposit box
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If your business has been hit by a disaster, like a hurricane, tornado, or blizzard, you may lose your business records. If you lose those records, you won’t be able to show proof of relevant business expenses for tax deductions. You also may need to use business records to prove  losses incurred due to the disaster. Luckily, there are some ways to recover these documents or prevent damage to these records in the future.

Key Takeaways

  • You will most likely need to reconstruct your business records so you can provide necessary documentation when filing an insurance claim. 
  • If you’re claiming a tax deduction, you’ll need your business records to show proof of your expenses.
  • Keep secure digital and physical copies of your business records before disaster strikes so that you won’t have to reconstruct them.

Documents Related to Tax Deductions

The IRS requires businesses (and individuals) to provide records to prove they are entitled to their  tax deductions. You also need to have business records that support or prove expenses for deductions in case you are audited

You will need to attempt to reconstruct those lost business records. You’ll want to try to get:

  • Copies of invoices from suppliers, dating back at least one calendar year
  • Pictures or videos of buildings, equipment, and inventory
  • Copies of business bank statements
  • The previous year’s federal, state, and local tax returns

Documents Related to Disaster Damage

If you, your business, or your business records are in a federally declared disaster area, you might be able to delay filing your tax returns while you try to recover your documents. 

After a disaster you’ll want to take photographs or videos of the damage as soon as possible. You’ll also want to try to reconstruct the fair market value of any real property, physical property, or vehicles. If you have insurance or are eligible for help from the government, you should file a claim for assistance as soon as possible so your losses are documented. 

Documenting Business Losses 

You will need your asset records to document the losses to business assets, including vehicles, equipment, furniture, and fixtures. You can report casualty losses on your business or personal tax return. IRS Publication 547 describes the process for determining deductions for losses, the after-tax loss, and the reduction in fair market value.

You can apply for assistance with FEMA or try to get a disaster loan from the Small Business Administration.

Tip

Small businesses can apply for a low-interest SBA disaster loan if they need additional funds after a disaster. Businesses will need to register with FEMA and apply at disasterloanassistance.sba.gov. You should hear back within two to three weeks of applying.

Protecting Business Records From Disaster

Of course, the best way to assure that your business records survive a disaster is to protect them before the disaster strikes. Keep physical copies of your records in a safe place outside of your business. Back up your records online as well.

Tip

Use cloud storage to back up your files. Your documents won’t be on a single hard drive or computer but will instead be accessible from any computer. 

What to Do Before Disaster Strikes Your Business

Make sure you know what types of disasters can occur where your business is located. That way you’ll know which precautions to take. For example, if there is frequent flooding in your area, you may want to keep any important records on the top floor of your business. 

As a general rule, all small businesses should have secure physical and digital copies of their records. They should also make sure to preserve documents for as long as is required by the IRS.

Frequently Asked Questions

How far back does a business need to keep records?

Businesses should generally keep their documents and records for seven years, though this depends on the type of document. For example, tax documents should be kept on file for at least three years since the IRS usually won’t conduct an audit on any returns filed more than three years ago. If the IRS identifies a substantial error, the agency may go back further than three years, but typically won’t go back further than six years. Some documents, like ownership records and patent and trademark registrations, may need to be stored indefinitely. 

What qualifies as a disaster for taxes?

In order to make claims on your taxes concerning a disaster, the losses must be caused by a federally declared disaster. A federally declared disaster can include an event like a tornado, hurricane, volcanic eruption, or earthquake. You can then deduct the cost of any property loss or damage caused by the disaster on your tax return.

Updated by
Kristen Rogers
balancebio
Kristen works as a freelance writer for The Balance covering small business topics and terms pertaining to entrepreneurship, business finance, and more. With a background in business, marketing, SEO, and news media, Kristen has experience in management at a Fortune 100 company and writing and editing content for education, news, and business websites.
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  1. IRS. “About Publication 547, Casualties, Disasters, and Thefts.”

  2. SBA. “Three Steps to SBA Disaster Assistance Loans.”

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