The key to staying out of trouble with the IRS is to keep records.
Even if you’ve played everything by the book, if you don’t have documentation to support your position if the IRS asks you questions, you could find yourself stuck with an additional tax bill, plus penalties and interest.
So, what records should you keep?
Income and sales records
Details of all the tasks you've completed through Airtasker, breaking down gross income less the Service Fee.
Expense or purchase records
- Records of all your business expenses such as materials, motor vehicle costs (fuel, servicing and repairs), work-specific clothing, etc., including cash purchases. Records could include receipts, invoices, credit card vouchers and diaries to record small cash expenses.
- If you purchased something which is partly used for private use and partly for business use, you’ll need to keep a record showing how you worked out any private use for that item.
- These include lists of people that you owe money to (creditors) and lists of people who owe you money (debtors).
- You’ll also need worksheets to calculate the decreasing value of your assets (of which your car might be the main one). These are called 'depreciating assets'. This calculation can be complex and you might be best to get your accountant to prepare this for you.
- Documents you receive from the bank; such as bank and credit card statements and loan documents.
Tip: Allow time each week to keep your records up-to-date. This helps when it's time to do your tax as all the information is already there and you're not overwhelmed with paperwork. This frees up time to focus on making money, instead of doing paperwork.
You may want to make use of one of the various apps on the market, which enable you to record expenses as you go.
You must keep your records for at least five years, either in paper form or electronically. As paper invoices and receipts tend to fade, we recommend electronic copies.