A Guide to Maintaining Accurate Records for Summer Contract Jobs
It’s summertime and many of us find ways to generate additional income, especially as a seasonal employee. If you are a 1099 or “gig-economy” worker – Uber driver, nanny, freelance writer, or Airbnb host, for example – unlike the traditional W-2 job, the responsibility is on you to run your business and handle taxes.
So, what do you need to keep in mind? As intimidating as it sounds, you need to maintain and keep accurate financial records and expense tracking.
What Should You Track?
Track every travel, entertainment, gift, and transportation business expense you plan on writing off. Here is an example of the level of detail you should keep:
|Travel||Cost of each separate expense. Total incidental expenses in reasonable categories.||Dates the you left and returned for each trip and the number of days you spent on business||Destination or area of travel (name of city, town, or other designation)||You need to document the business purpose of the expense, or the business benefit you gained or expected to gain.|
How Should You Track Expenses?
Keep a record that supports each expense on paper or even on your computer. Provide a written statement of the business purpose of an expense and keep evidence of your expense. This includes, but is not limited to:
- Canceled checks
- Invoices marked paid
- Computerized records
You do not need duplicate records, but your records and receipts should complement each other.
Why Keep Timely and Adequate Records?
Keeping and maintaining accurate financial records is critical because you can support deductions if the IRS examines your tax return. And, remember this: timely records carry more weight than records prepared or recreated at a later date, as written evidence is more reliable than oral evidence alone. So, if the IRS ever challenges you, keeping records as you incur expenses will mean more credible documentation to support your deductions.
You can’t and shouldn’t deduct anything that you don’t have records and receipts to support. Approximations don’t work in the eyes of the IRS, so be conservative in your record keeping as a contractor.
If you are unsure if you are keeping accurate track of your records, it’s a great idea to consult with an expert tax advisor. Your tax advisor will help you determine if your record-keeping methods will comply with IRS standards. We are open all year long, so come in for a free consultation and let us help you get your records in order.