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Accounting and Tax Tips Blog

At Shared Economy CPA, we’re always being asked by potential clients, “what records do I need to keep for my 1099 taxes?” or “what expenses should I keep track of?

We hope that we’ll be able to provide you with more insight because most Airbnb and rideshare drivers are considered to be self-employed and are permitted to claim these deductions via Schedule C (Form 1040) or Schedule E (in certain circumstances). However, in order to be eligible for such deductions, the IRS requires that you keep careful records of your work-related expenses. Here are the most common expenses that you should keep track of.

Rideshare Business Expenses

For a rideshare business, you have the option to take a deduction for the business use of your car via the actual expenses method or the standard mileage deduction. If you opt to use the actual expenses method, make sure to save your receipts and create detailed logs with the costs of gasoline, oil, repairs and maintenance, insurance, auto loan interest, and lease payments. For the standard mileage deduction, you will need to keep track of the number of miles that you drove for business with mileage logs. If you use your vehicle for both personal and business use, keep in mind that you are only permitted to report the expenses related to driving for business.

Homeshare Business Expenses

For Airbnb hosts, there are many expenses that you should keep track of. These expenses include mortgage interest, property tax, insurance, operating expenses, cleaning fees, maintenance and repairs. You can also deduct the guest-service or host-service fees that are charged by the homeshare company. Make sure that you keep records regarding the rental days and the days that you personally used the property so that you can properly separate your personal and business expenses.

Safeguard Your Expense Records

It is important to keep your expense documents because they support the entries in your books and on your tax return. In the event of an IRS audit, the IRS will want to see the documents that show the amount paid with a description that shows the amount was for a business expense.

Documents for expenses that you should retain include the following:

● Canceled checks or other documents that identify payee, amount, and proof of payment/electronic funds transferred
● Cash register tapes
● Account statements
● Credit card receipts and statements
● Invoices
● Petty cash slips for small cash payments

Even if you’re never audited by the IRS, you need to have a receipt to claim a deduction. If you do not have the correct documentation in place, you will need to contact the appropriate financial institutions to help you reconstruct your expense records by sending you copies of checks, statements and receipts. In the event of a natural disaster the IRS, may grant a reprieve. However, it is still your responsibility to obtain the proper records.

Generally, you must keep your records that support an item on your tax return until the period of limitations for that tax return runs out. The IRS outlines the specific guidelines for income tax returns here. In most cases, you are required to keep records for a minimum of 3-7 years.

To ensure that you have the documents that you need, saving your records electronically on your smartphone, computer or in the cloud is a good option. Scan or take high quality photos of paper documents. Update and check your records regularly for accuracy. By taking the necessary steps to secure your records, you can make sure that you take all of the deductions that you are entitled to and that you will have the information available to back up your claims if the IRS launches an inquiry into your tax filings.