Do I need receipts for my pilot or flight attendant expenses?

By Jason Watson (Google+)

Receipts and recordkeeping are common concerns. It is your responsibility to prove your expense- in the absence of proof, the IRS and the Tax Court will allow some estimation but it is weighed heavily against the taxpayer.

Here’s the skinny: you need a record showing the business nature and you need documentary evidence showing that you paid the amount, who you paid it to, and the date.

A record is:

1. Logbook

2. Account Book

3. Diary

4. Or something similar (iPhone app, electronic journal, etc.)

Documentary evidence is:

1. Receipts

2. Canceled Checks

3. Bills, Invoices

4. Credit Card Statement

5. Bank Statement (for electronic funds transfer)

What does all this mean? If you have a receipt, you should jot down what the purchase was for. If you have a credit card statement, you should circle the amount, and make a note what the purchase was for. If you make payments in cash, you should get a dated and signed receipt showing the amount and the reason for the payment. Essentially your documentary evidence must show the amount, date, plate and the nature of the expense.

Myth Buster: Simply keeping track of your expenditures in your iPhone or Android will not be enough. This would only be the record part of the two-part requirement. If you spent $125 on headset repair, you can keep an electronic record of the purchase but you also need a receipt, credit card statement, etc.

Also, documentary evidence is not required for items under $75, even if they collectively exceed $75 (for example, dry cleaning).  However, a record in most cases will be required by the IRS in the event your tax return is examined.

Please understand that keeping all receipts is still the best procedure for minimizing tax complications regardless of the $75 caveat. Credibility is critical if you are required to present your proof to the IRS.

We will not need copies of your records or documentary evidence to prepare your tax return.  This is only in the event your tax return is examined by the IRS.

In looking ahead, our advice to flight crewmembers (and even to small business / rental owners) is to use a separate credit card for expenses associated with your job.  We understand that using separate credit cards might create some hassles, but ensuring that all your job related expenses are properly documented and more importantly deducted on your tax returns should outweigh the inconvenience.

You can also read our article on recordkeeping at wcginc.com/Recordkeeping.pdf.