Selling real estate requires realtors to be on the go all the time. It’s difficult to keep any kind of records under those circumstances, but there are some things you can do.
Here are some steps you can take for effective record management.
- As with any positive behavior change you want to do, is to make record keeping easy. If you have to do it on your laptop or PC, which is in your office and not with you at the moment, chances are you won’t do it. For that reason, I recommend getting an app for your cellphone. PC Magazine has rated a number of these apps and rate Expensify, Certify, and Rydoo among the top. I recommend looking at demos to see which one is easiest to use and go with that one. If you get in the habit of entering your expenses on a daily basis, it won’t take that long and the expense is fresh in your mind; so, you won’t forget it.
- If you take a client to lunch or dinner, make an entry in your calendar stating who (which is probably already there from when you scheduled it) and more importantly, what you discussed. This information is equal to, if not more important than, the receipt for audit evidence.
- Your broker probably pays a lot of your expenses and then deducts them from your commission check. At the end of the year, you get an annual statement of whatever the broker paid and deducted from you. This you can either give directly to your tax preparer or you can merge it with your own expenses so that the whole picture is in one place.
- Metropolitan Regional Information Systems (MRIS) fees, and such, may be entered from your credit card statement. Your evidence is usually in an electronic form and part of an email. Those are among the easiest to track and prove.
- Mileage seems to be hard for everyone, but it needn’t be. Either in your expense tracking software or on your daily calendar, enter the beginning odometer reading for the day. Before you drive home, enter the ending odometer reading. This takes less than ten seconds, but nobody seems to be able to do it. As with any habit, do this for 21 days and you will find yourself doing it without thinking. Tip: Take a photo of the odometer when you get in and before you leave the car.
The key to making an IRS audit as painless as possible is to be organized. If the first, several items the Agent asks for are accurate and well documented, you will find the Agent wrapping things up quickly and moving on to someone else, who might be easier “pickings” for IRS.