Insurance Insights: The Cleary Insurance Blog
The Cleary Insurance blog covers insurance, risk management, and financial planning for New England businesses and individuals. Our team of licensed advisors and specialists publishes regular articles on commercial and personal coverage, employee benefits, life and financial planning, and insurance compliance. Browse recent articles below, or use the category filters to find topics relevant to your business or personal situation.
Tax Filing Deadline
As the countdown to April 15 continues, it’s likely that you’re knee-deep in receipts, canceled checks, brokerage statements and other financial records that your tax advisor will need to prepare your individual income tax return. Having organized records — and knowing when to keep or discard them — can ease the pain of tax season.
Managing Your Tax Records
Maintaining accurate and up-to-date financial records is critical to determining your tax liability. Carefully review your records at least once a year and discard what’s no longer necessary or relevant. Here are some guidelines for managing specific records:
Tax-related documents. Keep tax-related documents, such as receipts that support your deductions, for at least three years after you file your original return. Why? Because the IRS typically has three years from the date you file — including extensions — to audit you. (If you omit more than 25% of the amount of your gross income stated in your tax return, the statute of limitations can extend to six years.)
There’s no time limit if you fail to file a return (or file a fraudulent return). So permanently keep a copy of tax returns for a longer period of time (10 years or more) as evidence that you filed.
Save W-2 forms until you start receiving Social Security benefits to serve as a record of your work history and earnings. Your annual statement from Social Security will show your earnings history per their records.
Property records. Hold on to closing documents from a property sale or purchase, as well as receipts from home improvements or from money you invested in the property, for at least six years. If you’ve owned your home or other real estate for longer than that time, keep your tax return and records relating to any improvements dating from when you purchased the property so you can document your adjusted basis in it.
Investment account statements. Keep investment statements until you receive your year-end statement and confirm that it reflects your transactions for the year. Save trade confirmations that show the purchase and sale of mutual funds and stocks for three years after you report the capital gain or loss on your tax return.
Checking account and credit card statements. If your checking and credit card statements include deductible expenses, retain them for a minimum of three years after you file.
Utility bills. Keep these documents for a minimum of three years if you need them to support a home office or rental property deduction.
Pay stubs. Retain these until you’ve reconciled the totals with your Form W-2.
Organizing and Storing Records Safely
The IRS requires you to maintain the fundamental accounting records needed to file and support an acceptable tax return, including documents that reconcile differences between your accounting records and your return, to avoid penalties. This would apply to your individual tax return if you have a sole proprietorship or a single member LLC reported on Schedule C.
Are you able to easily locate all of your important financial records? Create a record keeping system that organizes important documents so that you can readily access them.
Maintain copies of these records at home, and keep the originals in a safe deposit box or other secure place in another location. You also may store records electronically so long as your computer storage system meets IRS security and retrieval standards.
Getting a Jump on Next Tax Season
April 15 may be only weeks away, but it’s never too late to begin organizing your financial records. Doing so will help you stand up to IRS scrutiny, ward off costly penalties and alleviate some tax-related stress.
At Cleary, we are committed to a holistic approach of protecting and preserving our clients’ financial assets. Give us a call today at 617-723-0700 and let us know how we can help you.
Disaster Recovery Plans
Of the U.S. companies that are victim to a man-made or natural disaster, the Contingency Planning Research Strategic Corporation says 43% never reopen their doors and 29% are out of business within the following two years. A study by Touche Ross found that companies without a disaster recovery plan only have a 10% or less survival rate. Business owners should be seriously asking themselves whether or not they have an adequate recovery plan for disasters.
There are three crucial areas that all disaster recovery plans should cover:
Physical Resources
- The physical assets of a business, such as equipment, electronics, office furniture, and the building itself, are things that usually can’t be quickly or easily replaced if they’re damaged during a disaster. An adequate disaster recovery plan should answer the following:
- Is there at least three days’ worth of emergency supplies on hand to carry the business immediately following the disaster?
- What steps can you, should you, and will you take to protect physical assets?
- How would physical assets hold up against various disasters (e.g. flood, hurricane, tornado, fire, or earthquake)?
- Who will assess the damage to physical assets following a disaster?
- Has a list been made to prioritize the replacement of key physical assets, and what suppliers or companies should be contacted for the replacement?
- Is access available from an off-site backup system if data and electronics are damaged, and how often should backups take place?
- How will important documents and records be kept secure and protected?
- Is an alternative facility an option to resume operations if the primary location is unusable; what location and type of facility would be needed?
Human Resources
All employers know that their employees are one of their business’s most vital assets. Therefore, employee safety and the resulting personnel issues that follow a disaster should be a top priority. An adequate disaster recovery plan should answer the following:
- Have all staff been adequately instructed on the disaster recovery plan?
- How will staff find safe shelter?
- How will contact be maintained with staff during and after the disaster?
- Are current contact numbers for all staff, vendors, suppliers, and clients available at an off-site location and how will this list be maintained and updated to stay current?
- Have staff members been identified to assume mandatory or key roles should other employees not be able to resume their roles?
- Are staff members assigned to form a crisis management team?
Operation Continuity
Getting the business back up and running after the disaster is top priority. An adequate disaster recovery plan should answer the following:
- Does insurance, in particular business interruption insurance, provide adequate coverage?
- What amount of cash will be available for emergency contingency expenses?
- If the facility isn’t usable, then where should an alternative command center be located to coordinate the recovery?
- Is there an alternative list of suppliers to use in the event regular suppliers aren’t operational?
- What should be done for clients and customers during and after a disaster?
Employers might further assign specialized teams to be in charge of some of the tasks related to the above points. For example, a post disaster recovery team could manage recovery tasks like getting the business up and running quickly; an administrations team could handle areas like logistics, transportation, and emergency and survival gear; a public relations team could make public announcements and field inquires; a client/supplier communications team could advise vendors and clients of the business’s status; and an IT team could be responsible for software and hardware issues.
Remember, disasters can strike with little, if any, warning. Business owners can keep themselves off the wrong side of the statistics by being prepared and being able to get themselves up and running as soon as possible. For more on disaster recovery, please consult the FEMA Emergency Management Guide for Business and Industry. In addition, Symantec and Ponemon Institute have developed an online Data Breach Risk Calculator, helpful for assessing cyber liability and your potential exposure to data breach risk.
At Cleary, we will evaluate your business exposures and work with you to develop a comprehensive plan to safeguard your business. Give us a call today at 617-723-0700.
Captive Insurance Programs
Captive insurance programs are an alternative to standard insurance protection. They are not new; but they are getting a lot more attention now than they had in the past.
Captives can provide the highest quality insurance protection for its owners. By banding together to create a true sharing of risk, the shareholders of a captive can control their insurance costs and avoid the volatility of the traditional insurance industry. Additional benefits are created through the increased assurance of coverage, the stabilization of premiums, and the improved management of risk through effective loss control and claims management.
Captives were created to satisfy the need of companies to obtain casualty insurance coverage at a predictable cost. They started when companies perceived that the commercial insurance industry was not responsive to their risk needs. The goal of these business owners was to:
- Increase buying power
- Allow member companies many of the same advantages of control generally afforded to only the largest companies
In addition to the tax deductibility of premiums paid into a captive, there is also the opportunity for the members to share in the underwriting profits and investment income of a captive.
Well run, financially stable, low loss frequency companies make ideal candidates for a captive alternative. If you are wondering if a captive alternative is for you, please call Mike Regan at Regan Cleary Insurance.
At Cleary, we will evaluate your business exposures and work with you to develop a comprehensive plan to safeguard your business. We are members of the National Association of Surety Bond Producers (NASBP), the professional organization for agents that also specialize in surety bonding. Give us a call today at 617-723-0700.