The time to file taxes is just around the corner, and I am still wondering about what expenses I can deduct aside from mileage.

I have a few other things I want to deduct:
* Car insurance
* Car registration
* Office supplies (printer paper, printer ink, pencil, pens)
* Computer
* Monitor screen
* Cell phone
* Router
* Modem
* Desk
* Chair
* Printer
* Internet service
* Utilities (electric bill)
* Cell phone service


The biggest confusion I have is deducting for home office space. Here's my situation:

I don't pay rent (I live with others). Sometimes, I use my office space for personal hobbies (estimated around 40% use related to business). This is where I spend hours writing narratives in my report. The space I use for business is about 1 yard by 1 yard (not counting the space the printer takes up).

Can anyone help me determine how to calculate expense for home office space? Should I calculate it or should I not bother to report it (if it's not deductible or too much work)?

Edited 2 time(s). Last edit at 04/16/2016 11:28PM by JohnT.

I do not deduct for a home office because I use that space, not only as an office for MSing, but also for other things. My CPA friend told me that you can only deduct for business if the space is set aside and used solely for that business purpose. Also - I don't see how you can take a deduction for the cost of office space if you don't pay for any of the space. How would you deduct the cost of space that you don't pay for? If you don't pay rent, do you pay the utilities? If you don't pay the electric bill, it would not be a viable deduction you could take. As for internet service, do you pay for the internet service or does someone else (those you live with?) If you pay it, you could maybe deduct a portion, but if it is also for personal use for you and others who live in the residence, the deduction might be very small, because only a portion of that cost would be attributable to the business.

As for car and car registration, do you use your car for other things besides MSing? I think you can deduct mileage for car usage when you MS but cannot write off all the costs for your car unless it is used solely for your business.

I suggest you consult a CPA or check the IRS website and research, because it is dangerous to file taxes based on information you get from anonymous strangers on an internet forum. TurboTax can walk you through many of the deductions, but keep in mind you cannot deduct things you didn't pay for.

There's a thread about taxes put up here by a CPA:

[www.mysteryshopforum.com]

When I started my own business several years ago I asked my CPA about the write offs. He said one room would only account for 1/5th of my costs since it's 1 room in 5 of the house. He also said I would be red flagged for an audit if the numbers don't add up because Uncle Sam would want me to account for all costs with receipts and proof. He said it's really not worth the trouble unless I purchase a lot of equipment in one year or can show the business has made a loss. As for mileage, I was told I needed to keep a notebook in the car and somehow highlight the ones that were used for the business as Uncle Sam wants proof if I were ever audited. He said some people list mileage as the distance from their house every time when in fact people go from one short distance to another and Uncle Sam has caught onto that scam a long time ago.

After talking to him, I did not list my business as a write off and I haven't listed MS as a write off. If you're good with keeping records and are spending money on MS then it might be alright for you. In my case, I really don't have any MS write offs except for mileage. Since I schedule my assignments with the cities I have to go to anyway, mileage is really an expense either. Bottom line, don't play with Uncle Sam, ask an accountant.

@JohnT wrote:

The time to file taxes is just around the corner, and I am still wondering about what expenses I can deduct aside from mileage.

I have a few other things I want to deduct:
* Car insurance
* Car registration)

If you are taking the mileage deduction you do not take any additional vehicle expenses except bridge tolls and paid parking incurred while doing jobs. There is an alternative method for calculating vehicle use which depreciates the vehicle and uses actual expenses paid and then figures the % used for personal, business and commuting mileage. Generally this is not a best method for shoppers as whatever method you commit to in your first year claiming the vehicle is how you need to report in future years.

@JohnT wrote:

* Office supplies (printer paper, printer ink, pencil, pens)

Items purchased in 2015 specifically for this business will deduct on Schedule C and are pretty obvious on the form where they deduct.

@JohnT wrote:

* Computer
* Monitor screen
* Cell phone
* Router
* Modem
* Desk
* Chair
* Printer

If these items you purchased new in 2015 and are used solely for this business they deduct as equipment expense on Schedule C. If you purchased them some other year you will need to depreciate them to determine what is applicable to 2015. TurboTax will walk you through this with your original date of purchase, original purchase price and % applicable to your business, so get your receipts together.

@JohnT wrote:

* Internet service
* Utilities (electric bill)
* Cell phone service

Is internet service you are personally paying for that solely for the use of your business? I don't know that any of us can prove that it is because of other users in the household and its use for our internet activities beyond shops. I am not willing to claim mine because I cannot prove that 10% or 25% or 50% or whatever percentage is for my business.

Utilities you pay get claimed only if you are deducting a home office space as expenses rather than the % of facility used.

Cell phone service. I do claim this because I have billable minutes and every minute is accountable for as shop minutes for phone shops performed.

@JohnT wrote:

The biggest confusion I have is deducting for home office space. Here's my situation:

I don't pay rent (I live with others). Sometimes, I use my office space for personal hobbies (estimated around 40% use related to business). This is where I spend hours writing narratives in my report. The space I use for business is about 1 yard by 1 yard (not counting the space the printer takes up).

Can anyone help me determine how to calculate expense for home office space? Should I calculate it or should I not bother to report it (if it's not deductible or too much work)?

How can you have expenses of a home office if you don't pay rent and don't own the property? You can't have as an expenses something that you never paid.

Thanks for your replies everyone!

Just for educational purposes, if I was paying rent, how would this work?

The easiest way for a renter is to calculate the office space in sq ft, then calculate the entire residence in sq ft, then figure the % of the total space occupied by the office. IRS has limitations as to how large and how much can be deducted so you would need to read about that at irs.gov, but generally it is the percentage of the rent represented by the office.

Edited to add: And the space is to be used 100% for the business using it. See the IRS guidelines for home office.

Edited 1 time(s). Last edit at 04/17/2016 03:17AM by Flash.

It's not worth it. If you own the house, it changes your taxes when you sell. The space has to be a dedicated space. Let's say you pay $1000/mo for your share of the rent. 9 sq ft is office space. The house is 1800 sf and you're splitting the rent with one other person. That's $10/mo that you can write off -- assuming that it's used for business 100% of the time, and you can prove that if audited. Plus, the IRS is going to want the tax ID of the person to whom you're paying rent, so they can get their blood out of the turnip.

You're increasing your risk of audit substantially for what amounts to 200+ miles of driving in a year. Find other deductions. Summit schedules for a thrift shop -- pick up a couple of those, use ItsDeductible to calculate the value of the items you're donating, and leave the home office deduction for those who actually HAVE an office in their homes.

Thanks @Flash and @PasswordNotFound for your knowledge!

It might be a bit off topic, but I'm still having a hard time determining depreciation for my computer, monitor, printer, cellphone, and office furniture. I'm not going to depreciate my modem and router. Here's my situation:

I bought my computer 2 years ago and I started mystery shopping last year. My CPA friend said that the value of an equipment starts with the fair market value of the equipment if I were to sell it. So, I'll turn it over to the experienced mystery shoppers here.

How did you guys depreciate your equipment and furniture, based on the IRS's depreciation rules?
[www.irs.gov]
[www.irs.gov]

Edited 1 time(s). Last edit at 04/17/2016 03:26AM by JohnT.

My first year shopping I used existing equipment and did not bother depreciating. The depreciation would have only been a few dollars here and there. Since then as I add or replace equipment I use the Section 172 option. TurboTax walks you through it quite well.

@JohnT wrote:

Thanks @Flash and @PasswordNotFound for your knowledge!

It might be a bit off topic, but I'm still having a hard time determining depreciation for my computer, monitor, printer, cellphone, and office furniture. I'm not going to depreciate my modem and router. Here's my situation:

I bought my computer 2 years ago and I started mystery shopping last year. My CPA friend said that the value of an equipment starts with the fair market value of the equipment if I were to sell it. So, I'll turn it over to the experienced mystery shoppers here.

How did you guys depreciate your equipment and furniture, based on the IRS's depreciation rules?
[www.irs.gov]
[www.irs.gov]

If you have a CPA friend I highly recommend you sit down with him/her to go through your taxes in great detail for the first year at a minimum. Pony up some money/beer/pizza for their time, if necessary. It will be worth it.

I drove over 7,000 miles in the nine months I have been mystery shopping and had to fix car so that it would pass smog test, these expenses were $735. Do they let you claim both or just the higher one??

With taxes the 7000 miles would have to be proved that they were Mystery Shopping only and no other routes. As for the smog test, you would have had to drive your car only for Mystery Shopping to claim it. What percentage were you using your car personally, what percentage were you using your car as a Mystery Shopper? These are the things you have to prove to the IRS form. Fixing your car, the percentage you used your vehicle to Mystery Shop is the percentage you can write off. You can't just write off repairs, gas, mileage, etc unless you have a vehicle that is only use when you Mystery Shop.

Please, the tax man shut that nonsense down years ago. Can't write off what's not legal.

The statement that you cannot write off mileage unless you have a car that is 100 percent for MS is incorrect. Also, if you use mileage for tax purposes, you cannot also claim repairs. You either claim mileage for shopping trips or a portion of actual expenses attributed to the shopping portion of total mileage.

Unless the rules changed since I checked it a few years ago, in the first year you use the vehicle for business you need to decide how you will handle the vehicle expenses, then stick to that method--either actual cost or business miles.

In either scenario you need to keep a log of how many miles were commuting to a 'regular' job/place of employment (not deductible), how many were personal miles (a non-shop trip to pick up the kids or go to the grocery store or on vacation), how many were 'business miles'. If you are using actual cost, make sure you don't deduct things like gas costs or oil changes etc. for which you were reimbursed.

So lets say that licensing, insurance, depreciation and services such as gas, repairs, maintenance that were not reimbursed by shops comes to a total of $4368, you drove 7000 miles and 700 of them were business miles for shops. 10% of your miles were 'business miles' so 10% of the $4368 would be your deduction. If you just took the business miles at the IRS mileage rate for 2015 your deduction would be 57.5 cents x 700 = $402.50.

Leased vehicles are handled differently than owned vehicles. If you lease or generally buy new and trade in within a couple of years the actual cost may make sense for you. If you own and run a vehicle for many years, the IRS mileage rate generally makes more sense.

Gather all your information and talk to your tax person before you make your decision which way to go if you think actual cost may be a better deduction for your business. But realize that with the mileage option the only additional vehicle expenses allowed are parking and tolls. And of course everything needs to be documented.