RECORD KEEPING

 

What records should I keep?

 

Record-keeping can be frustrating for travelers, and we realize that. However, if you were audited and did not have those records, you could the tax-free status of the per diems and other reimbursements. That can add up to about 15-25% of the total in taxes. (Ouch!)

1) – KEEP COPIES OF ALL CONTRACTS! Companies do not keep them for you. AND those on-line versions disappear after 1-2 years.

2) – Mileage log. – Travel Reimbursements to get to and from the assignment must be substantiated. This means you must show that you “use up” that travel cash. (FYI: this is also why we have you save other things like hotel stays while on the road.) At the minimum, you need to go to Google maps and print off the calculated distance page.

3) – Keep receipts for anything else we ask for in our workbook. While your credit card statements may accurate for preparing your tax returns, it is the actual receipt that the IRS would require from you. Saving a copy on your computer/phone is acceptable.

4) – DO NOT save any grocery or food receipts. Those are covered under the meal per diems and your contract shows that you were away from home.

 5) – DO NOT save gas receipts unless you are renting a vehicle. If renting, you need to save gas, and all related receipts and still keep a mileage record. A leased car (long term) gets treated as an owned car, so you just need to keep track of miles.

6) – The IRS has up to 3 years to audit a return, usually they notify taxpayers about 2 years into that time period. Therefore, anything used to obtain the numbers put on the tax return needs to be kept 6 years and you can stretch it to 7 for a one year overlap. (If the IRS suspects major issues with unreported income, – and travelers do have a lot of income tied up in unreported reimbursements, – they can then open the audit up to 6 years.) YIKES!

RECORD KEEPING – What to keep and how long?

Because the IRS has up to 3 years to audit a return, usually they notify taxpayers about 2 years into that time period. Therefore, anything used to obtain the numbers put on the tax return needs to be kept 6 years and you can stretch it to 7 for a one year overlap. (If the IRS suspects major issues with unreported income, – and travelers do have a lot of income tied up in unreported reimbursements, – they can then open the audit up to 6 years.)

One item many travelers fail to keep is contracts. Every traveler needs to keep copies of their contracts! In case of an audit, it is their only proof that they really had a temporary assignment and get to keep all of those per diems as tax-free.