Please not that I am not a tax professional, so please understand that this in not tax advice, and may not be accurate. I recommend consulting an accountant. Also, TurboTax is very helpful in walking you through filing your taxes.
Being a mystery shopper means you are an independent contractor — which means you are effectively running your own small business.
With that, comes a load of advantages with your taxes. Yes, your taxes will be a little more complicated, but you get to have a whole slew of deductions that would otherwise have been unavailable to you.
This is important, because many people LOSE a lot of money because they miss out on their deductions.
When filling out your IRS forms, you get to do something called a Schedule C. This is where you report all of the money you’ve been paid as part of your business (yes, all of it!). But you also get to report ALL of your expenses. And with mystery shopping, there are a lot of expenses.
Look at it this way: You need to use the internet to get assignments. That’s an expense. You might need to buy a fax machine. That’s an expense. You need to drive to the assignment. Your mileage is an expense. You have to buy something at the store. That’s an expense. You might need to print a report, mail it, or fax it. All of those things are expenses.
And expenses are subtracted from your gross revenue. That’s how you determine your net profit. And its profit that you pay taxes on.
There is one very important rule that you must keep in mind when it comes to expenses: It has to be a “required” expense. That means, the expense had to be necessary for your mystery shopping.
This is great because all of money you were required to spend as part of your mystery shopping assignments gets to be deducted from your revenue. That means, with mystery shopping, you get paid a lot of money without having to pay taxes on it.
(Please double check all of your expenses with your accountant to make sure they’re allowed. I personally use TurboTax, which walks me through the whole thing. I recommend you do your taxes using such a tool, or consult with an accountant before filing.)
Throughout the year its vital that you keep good records of all your expenses. Keep a log of your miles traveled. And keep a folder with all of your receipts. Those receipts are worth a lot of money come tax time.
If you have a separate space in your house, such as a small office, where you manage your mystery shopping, then you get to deduct a portion of all of your utilities AND your mortgage/rent payment. That can be a nice bonus.
Keep your eyes open for items that can be counted as expenses for your business. You’ll be surprised at how much can slip through the cracks if you’re not careful. But all of those expenses that you find means a lot of savings come tax time.
I appreciate the helpful tips.
Yes, don’t forget the tax deductions! This has really helped make Mystery Shopping beneficial for me. With mileage reimbursement amounts at 48.5 cents for 2007, and over 50 cents for 2008, this can end up being quite a bit. Just be aware that it can be hard to justify “required purchase” amounts if you get audited. For example, if you are told to “make a purchase” as proof of a visit, but have the option of returning that item, it would be hard to prove it was really a “required purchase.” If return is not an option, you would have to buy the cheapest item available in the store for it to be eligible to be a “required expense.” ~April (admin @ MomsWallet.com)
Just remember that you can only report a loss for 3 years, then the IRS considers Secret Shopping a “hobby.” So this will be the last year I can claim milage, depreciation, purchases and so forth.
Thank you so much for the great advise.
This will be very helpful.
Thank you for all of your helpful emails.
Regarding required purchases – if I am required to purchase 10 items (say from a grocery store), I generally have more than the 10 items on the receipt. It was suggested to me by someone that works for a tax prep office, that if I wanted to deduct them, I should always use the 10 least expensive items on the rcpt. Don’t know for sure – haven’t been audited for it….
Can some one give me the correct amount per diem for 2008.
Thanks in advance.
Batty
Very sound advice. I have been working at a loss the pass two years. Highly unlikely that I will turn a profit this year due to all the good deductions. Just have to cut down on what I claim next year I guess.
I enjoyed your artricle on tax expenses, etc. with reference to filing our taxes. I havent’ been doing this very long. The advice is good. Thanks.
I work at H&R Block as a seasonal tax preparer and have to say BE VERY CAREFUL with the fax machine thing or any items you use for mystery shoping. Because if you use it for personal as well, you have to figure out the percentage of usage for your business and if you get audited the IRS WILL ask you those questions. Just an FYI.
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As someone new to MS, I am bothered by having to fill out my SS# and birth date on the applications forms. I still wouldn’t like it, but I would feel better if I could see that the website was securer “https”, but none of them have been. I am surprised not to have seen this question raised in all the forums and postings I have been reading. Am I the only one concerned, and why?
Thanks
horace solutions is a scam. do not fill out anything for them. they send you a almost $4,000 check and then when you deposit it in the bank you will end up having to pay the bank the $4000 back. (and this is out of your own pocket) then a police office will more than likely arrest you for the check being a fake. (and this is whether you know it or not!!!!) so don’t fill anything for them out. look up the business and make sure it’s real and not a scam. we reported horace solutions when we didn’t find them in the directory in the better business beareu. so check with them 1st to make sure it’s a real company!!! i almost got mixed up in a scam. thank god me and my boyfriend got suspicious and called bbb. i would be in a bad situation if i hadn’t have found out they we’re a scam company!
thank for the tax information
please add me to your Mystery shopper list i realy can use the job badley so add me im a, good hard worker
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This is very well detailed and practical, thankyou. I like how you explain points minus hyperbole. It’s useful info and I deem you worth sharing.
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