Independent Contractor, Traveling Job...What records to I need to keep?

Question

I am fixing to sign a contract with a company. I cannot divulge too much information here, as it is a covert type position (evaluations).

My pay will be $800 to $1000 a month, minimum, but the job will require somewhat extensive of traveling to various locations the company owns throughout the state.

I assume that basically, all I will have to do is track my meals while working, gasoline expenses, and then ensure I take enough percentage out of my monthly check for taxes.

Should I just do actual cost on my gasoline (by keeping gas station receipts) or should I use the CPM?

Also, would vehicle maintenance or repairs be something I should track and take off of my "profit"?

How about the use of my home office equipment, considering I will be submitting reports online?

At this point in time, Independent Contracting is all I will be doing, so I won't have customers buying from me or anything, but I DO have a tax number now.

So, anything else I need to know?

Thanks!!

Answer 1

On your records, you're going to want to keep three years worth of receipts for all your deductions. So, depending on what you choose to deduct, make sure that you keep track of the information you are going to need.

The advice I've received from tax people is this:

-- Companies can deduct actual expenses on auto-related items, where people have the standardized deduction per mile (32 cents?). If you were a company, you just need receipts. If you are a sole proprietor, you'll need a mileage log
-- If you are doing a lot of intra-city driving (which may not be the case here), set up a PO Box near your home and go there first in the morning. You can then track all of your miles after that, assuming you are basically doing work throughout the day. This makes your record keeping a lot easier, and it's been very defensible to take this approach in courts.
-- Store your receipts in envelopes, one per day. Put the receipts in the envelope, write the date, the amounts and purpose of each item, seal the envelope, and sign the seal. That's the best audit protection you'll ever get for any decisions you make (this advice came from an auditor, actually). Usually, the only audit danger anybody gets into is not having the records to back up their claims.


So, that should summarize all the auto-related questions. As far as office space, you can deduct any equipment and supply expenses (just keep receipts), as well as utilities and rent/mortgage payments for the portion of the home that you are using for your business. The only rule there is that you have a wall in place that defines where your office is and isn't (so, say two bedrooms in the house). The only caveat here is that if you are using say 25% of your home as on office, and taking 25% of your mortgage as an expense, and you sell your home down the road for a profit, you'll have to count 25% of the profit on the sale of your home (up to the amount deducted in the past) as revenue on your company in the year of the sale of the home.

The good news is that you're getting some real-world experience with the administration of a company. It kind of feels overwhelming at times. Don't get too caught up with it, just get in the habit of keep receipts and filing them daily. If all else fails, use a tax preparer at the end of the year to double check how you've done. They cost usually about $300, and they'll usually save you more than that.

Good luck!

Answer 2

The IRS does not like it if you itemize for gas, etc. Their standard is the CPM which includes maintenance, oil changes, tires, etc as well as gas. Otherwise you cannot show that your tank of gas was not used for personal purposes. So go by the CPM.

You should submit quarterly tax payments and forms for your income tax as this will be less painful than having to come up with it all at once--- and depending on how you are paid, this could be the legal requirement too. Also make sure you do the same with FICA as that's going to come out of your pocket too.

Keep reciepts for everything else---even parking meters and tolls. Although I'd think the employer would be paying for these things while you are in their employ.

Answer 3

if you are a independent contractor every thing you use for work can be deducted. form babysitter, gas, mileage, oil changes, food, save all your receipts start a monthly folded or large envelope to keep ever thing in.most bank has a tax account you can set up that will send the government you money how ever often you want them to that way you dint have to worry about a lump sum at the end of the yr. and the tax id thing EVERYONE HAS A TAX ID # ITS YOUR SSN JUST ADD A 0 IN FRONT OF IT AND YOU CAN BUY JUST ABOUT ANYTHING WHOLESALE. If you don't want you business to be associated with you and want to file separately tax's the apply for a tax ID #.