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Tax, SDIRAs & Cost Segregation

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Russell Quealy
  • New to Real Estate
  • Weatherford, TX
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What documents do I need to write off labor for a flip?

Russell Quealy
  • New to Real Estate
  • Weatherford, TX
Posted May 16 2022, 14:44

Hello BP!

I've been doing some research and I cant find the answer to my question so I'm coming to you! Right now I'm in the middle of a Fix and Flip and I'm trying to make sure all my documentation is in order for next years tax season! But I had some contractors come to the house and do some light work but it was all paid under the table in cash (about 1k). I didn't think about it at the time but is there anything i need from them like an invoice to be able to write off that labor charge? Or will the IRS just take my word for how much my total labor charge is?  

Also, on the topic, I keep records of mileage, gas receipts, materials, my purchase price, closing costs, basically everything i have spent has been recorded but don't have a physical receipt for everything. 

Any help would be greatly appreciated! 

Thank you!

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Matthew Crivelli
Lender
  • Lender
  • Massachusetts
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Matthew Crivelli
Lender
  • Lender
  • Massachusetts
Replied May 16 2022, 15:32

I would want a receipt for the work in my hands if I was writing it off on my taxes. The government may or may not take your word for it so I would want to be prepared if they wanted to take a look. Usually paid in cash / under the table & tax break don't go hand & hand lol. @Russell Quealy 

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Basit Siddiqi
Pro Member
#3 Tax, SDIRAs & Cost Segregation Contributor
  • Accountant
  • New York, NY
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Basit Siddiqi
Pro Member
#3 Tax, SDIRAs & Cost Segregation Contributor
  • Accountant
  • New York, NY
Replied May 21 2022, 15:49

Yes - You will need an invoice.

Depending on the amount, you may want to consider issuing a 1099. 
Failure to provide a 1099 if you had the requirement to do so may result in penalties.

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