7 Documents Every Independent Contractor Should Keep

Freelancers and contractors are projected to make up more than 40 percent of the US workforce by the year 2020, likely leading to more scrutinized employment laws. Protect yourself by keeping important documents securely stored and easily accessible.

Keeping track of business documents seems like an obvious obligation for an independent contractor, but the “what”, “why” and “when” of this obligation remains a gray area for many. With Uber’s recent legal challenges concerning the worker classification of independent contractors, documented proof is only sure-fire way to defend against fees and legal claims from the IRS.

But do you know exactly what to keep, and how long to should keep it for? Leaving a paper trail to prove independent contracting work is more important now than ever before, and Shoeboxed wants to make sure you understand the benefits of keeping the following documents safe, secure and accessible:

Invoices (7 years)
Key business ledgers like invoices should be kept for a minimum of seven years, and for good reason. It’s the best way to protect your contracted accounts against a conflict with a client project. Invoice statements also verify that you are subject to profits and losses, which is one of the factors in the Twenty Factor Test for an independent contractor. In the event of an IRS audit, this will help prove your status as a contractor.

Travel Mileage Logs (3 years)
Like any good expense reporting habit, keeping travel mileage logs ensures protection against tax audits and business disputes. They can also be used for travel deductions, earning you up to 57.5 cents for every mile you claim. There are plenty of travel miles that qualify, including business travel to and from airports and hotels, errands and supply runs, travel to client offices, and to and from business meals. Don’t miss out on those valuable deductions!

Business Cards (Forever)
Being a successful contractor requires agile networking skills. At any given moment, there’s a chance that you will stumble across your next great project, partner or client. Unfortunately, contractors collect dozens of business cards every month that are habitually trashed or misplaced. Keeping business cards can help secure resourceful relationships; you never know when one of those contacts will come in handy. Working for multiple clients is also part the IRS’s Twenty Factor Test, and business cards may provide evidence that you are not controlled by a single employer.

Service Advertisements and Listings (Forever)
Keeping copies of past service advertisements and listings is yet another easy way to formally and legally prove a contractor-client relationship. The IRS says that making services available to the general public on a regular and consistent basis demonstrates autonomy in the nature of the work. It also confirms your intent of work in the event that a client wants to claim you as an employee rather than a contractor.

Project Records (7 years)
Contractors are required to fill out form 1099-MISC, a detailed document that asks what you made for each individual job. Project documents, including the contract, change orders, correspondence, logs, monthly reports and schedules provide the specifications and technicalities needed not only to fill out a 1099, but they also provide detailed insight of your contract work to the IRS if your worker classification ever comes into question.

Tax Returns  (3 years)
Due to the IRS statute of limitations, three years from the date of your tax return (or from the date of filing, whichever is later) is typically the standard time to keep business tax returns for tax-related business documents. The statute states that you have three years to file a claim for a refund, and the IRS has three years to appraise a tax if your income was not accurately reported. Even if these two situations don’t apply to you, keeping recent tax records protects you from any doubts that may be raised against your tax filings in the future. (Source)

Professional Licenses and Insurance Certificates (Forever, or until expiration)
Many jobs require contractors to be professionally certified in a given field of work in order to complete a client project. Though the regulations vary state-by-state and city-by-city, having these documents on hand and ready to present to a potential employer streamlines the hiring process, increases the probability of getting hired for the job, and may even increase your potential pay. Clients want to know they are legally protected and are hiring the right person for the job — it pays off to gain their trust from the get-go. (Source)

Lastly
Freelancers and contractors are projected to make up more than 40 percent of the US workforce by the year 2020. Make sure you’re protected against new contract work laws and save your documents for secure and easy access. Shoeboxed offers mail-in services with premium plans, allowing contractors to send in their important documents and never have to worry about being able to find and provide legal supporting documents for their contract work. Focus on working for yourself and doing what you love — we’ll handle the paperwork.





5 Reasons to Check in with Your CPA Year-Round

Working with a CPA can save you money and protect you from getting an IRS audit. Here’s why you should work with a CPA all year long, not just in April.

A CPA isn’t someone you should see just once a year. You should take just as much care selecting and building a relationship with your CPA as you do your doctor. While your physician is your main partner in your physical health, your CPA is your primary other half for your financial health (preferably in tandem with a financial advisor). It doesn’t matter if you “just” file a 1040EZ each year or you pride yourself in keeping up with the latest IRS tax changes, because it’s a CPA’s full-time job to know the ins and outs of taxes, which means they know more than you.

Simply put, working with a CPA can save you money and protect you from getting an IRS audit. While the fees for a CPA may look steep up front, many of them won’t nickel and dime you. In fact, there are many CPAs who will only charge you for the time required to actually file your taxes, which means you can shoot them the random tax question any time of year without being charged for it. They’re like your personal inside source to Uncle Sam.

Here are the big reasons why you should secure a CPA throughout the seasons and not just in April:

1. They’ll keep you on top of things

Need a reminder to file your quarterly taxes or on the fence about buying a house this year? Your CPA is that bug in your ear that keeps you in the best tax-related financial health. They’ll keep you informed of any changes, recommend moves to maximize this tax year, and make sure you don’t slip up if you’ve arranged for IRS payments.

2. They’ll save you money

No matter how much or how little you pay in taxes, without a reputable CPA by your side, you’re overpaying. Millions of unclaimed tax dollars sit abandoned each year. Whether it’s writing off postage or forgetting to deduct that eco-friendly applianceyou bought, your CPA will pore over every last purchase to make sure you’re never overcharging yourself. The IRS will take what you give them, if not more, so don’t willingly donate to Uncle Sam.

3. They know all the legal loopholes

A “loophole” doesn’t have the best connotation, but as long as it’s legal, why shouldn’t you get the most benefits? Taxes aren’t easy (no matter what the commercials say), and you can’t rely on a part-time bookkeeper at a pop-up shop in April to know all the ins and outs. You wouldn’t go to a part-time dentist who spent 10 months out of the year waiting tables to take care of your teeth, would you?

4. They help you plan

Not sure if you should start your own foundation or pay into an existing one? Confused on where the best place to open your business is if you live near a border? Asking your CPA any and all money and business related questions throughout the year helps you make the best decisions for you. Sometimes as seemingly minor as opening up shop in Portland instead of Vancouver can cost you thousands since Washington has no state tax and Oregon has some of the highest in the country.

Remember: Your CPA is on your side and has zero interest in getting involved in an IRS audit with you. They’re your advocate, and you can happily pass off the dirty work to them. Just be open and honest with your CPA, and you’ll likely avoid an audit while enjoying more of your hard earned cash. It’s a win-win for everyone.

Larry AltonLarry Alton is an independent business consultant specializing in social media trends, business, and entrepreneurship. Follow him on Twitter and LinkedIn.

The Truth About Audits

tollefson.ann@Gmail.comIs there any word more dreaded than the “A” word? Many small business owners run for cover at the mere mention of an audit – even if they keep impeccable books and have absolutely nothing to worry about.

The possibility of getting audited holds a sort of mysterious power that strikes fear into the heart of SMBs and individuals alike. The truth is that getting audited is a lot less common than you might think, and more importantly, is probably nothing to worry about.

Here are our top five audit myths, busted! Continue reading “The Truth About Audits”