Record-Keeping Tips for Real Estate Agents and Independent Contractors

As real estate agents and independent contractors, keeping accurate and organized records is crucial for managing your finances, staying compliant with IRS regulations, and proving your expenses come tax time. While it may seem tedious, establishing good record-keeping habits can save you significant time, money, and headaches down the road. Here are some top tips for real estate agents and independent contractors to streamline record-keeping:

Track Your Miles

As a real estate agent, miles add up quickly driving to showings, open houses, client meetings, and more. Be sure to track your mileage not just for estimating taxes, but for capturing expense deductions. Apps like MileIQ automatically log miles driven for work so you have accurate driving records. Dropping a spreadsheet on your phone to manually log odometer readings at the start and end of each work trip also does the trick. Deducting miles at the current IRS rate provides substantial savings each year.

Save Listing Details

For every home you list or sell, keep detailed records such as the address, listing date, sale date, final sale price, all marketing expenses, staging costs, and any home repairs or improvements made. This documentation helps verify your income for tax purposes and proves deductions for listing-related costs. Set up a standard template in a spreadsheet to capture all listing details in one organized spot.

Retain Receipts

Never throw away receipts for any purchase related to your real estate business, no matter how small. Expenses like office supplies, printer ink, your cell phone bill, online software subscriptions, brokerage fees, open house catering, advertising prints, and lockboxes for showings are all deductible. Take photos of receipts for your records. Apps like Expensify scan and store receipts to make organizing easy. Retaining receipts provides proof of expenses when filing taxes.

Document Client Interactions

Keep records of communications with clients like emails, texts, phone logs, feedback forms, and notes from conversations. This shows the time you invested in working with each client. For substantial exchanges, follow up with a quick email summarizing the discussion and decisions made to get written agreement. Maintain detailed client profiles and notes in your CRM system. Thorough documentation protects you legally and shows client relationships for tax filing.

Establish a Bookkeeping System

Develop a bookkeeping process to record all business income and expenses. This can be as simple as a spreadsheet or more robust software like Quickbooks. Enter income as it is earned and expenses as they occur. Link entries to receipts and supporting files. Review bookkeeping weekly or monthly to catch any missing information. Consistent bookkeeping makes tax time seamless.

Save Brokerage Statements

Brokerages send out monthly or annual statements summarizing your transactions, closings, commissions earned, fees paid, and other key details. Save these statements each period as they prove your real estate activity and income. Brokerage statements often contain helpful summaries if source documents like listing agreements or HUD-1 settlement forms are lost.

Back Up Digitally

Store financial records both physically and digitally for security. Scan key documents to create digital copies. Upload records to cloud-based systems like Dropbox. Use apps like Evernote or OneNote to organize receipts and statements. Enable auto-save features so records are always preserved. Backing up provides protection if originals are damaged, lost, or in case of an audit.

Consult a Tax Pro

Connect with a qualified CPA or tax professional experienced with real estate professionals and independent contractors. Discuss what records you need to maintain. Review your bookkeeping system and digital files to get advice on best practices for your situation. An expert can spot gaps in your processes or point out redundant efforts to make record keeping more efficient.

Make It a Routine

Set reminders to compile receipts, update bookkeeping, and backup files so it becomes second nature. Doing a little record keeping each week avoids stress at tax time. Develop checklists of important documents to collect each year such as mileage logs, brokerage statements, HUD-1 forms, and others. Organization now means less hassle as April 15th approaches.

Record keeping may not be the most glamorous part of working in real estate, but it is critically important. following sound documentation and organization practices makes tax filing vastly simpler and ensures you capture every allowable deduction. Treat record keeping as essential to running an efficient, compliant real estate business.

Interested in Learning More - Feel free to book an appointment on calendly here.