how to track cash expenses?

Question

I am wondering how I can account for cash expenses. I have a rental property that I did not have time to paint so I paid a friend cash to paint the rooms over the coarse of a few days. I am wondering how can I track this expense for labor since I do not have an invoice for the work or a receipt from paying him. Should I just get one of those cash receipt notebooks and let him write me up a receipt for the work? Would that be sufficient at tax time in case of an audit? Additionally I had to replace a couple of broken appliances, which I purchased off craigslist also for cash. What is the best way to account for these expenses for tax purposes?

Harriet Baldwin · Answer

"Accounting" is simple - journal entry.

Tax records, more complicated.  Check with your tax advisor (I am not one).  Personally, I have in the past written a check to "Mr. Painter Friend or cash", gone to my bank with Mr. Painter Friend, cashed said check and handed cash to Mr. Painter Friend.  I have managed to avoid this for a while (contractors have gotten more comfortable paying a check cashing fee at my bank, apparently).  ianal or an accountant, but you'll want Mr. Painter Friend's tax ID on a W9 to be totally compliant.  If it was a small amount, you may choose to be less punctilious.

For craiglist items, a money order may be the way to go.  If literally "cash only", get a receipt from the seller and/or take a picture of the cash laid out next to the item you are purchasing.

John Thedford · Answer

You need to get receipts for EVERYTHING. There is no other way to prove what was paid.

Bjorn Ahlblad · Answer

@Morgan Gruelle you will be required to provide receipts if you are audited, just like you will need to show mileage in a note book if you are deducting mileage expenses. Sounds like you could use a CPA? All the best!