As far as I know, everything Dspeakes says about hobby income is correct. What Dspeakes learned sounds like the same thing I learned, and the advice sounds like some I've given, too.
For example, I once had joint return clients who enjoyed two large incomes from their regular jobs, and claimed a side business of barrel racing. The wife was the barrel racer, and the husband assisted in all the work involved in making barrel racing happen. Although the wife was an enthusiastic competitor, she was not really tops at her sport and rarely won any money at all. Expenses, however, were enormous. Several costly horses were bought and maintained, a large trailer and a large truck to pull it were bought and kept up, and of course we were seeing expenditures for vehicle operating expenses, entry fees, lodging, and special clothing. It's a good thing they both had wonderful jobs or they wouldn't have been able to afford their "business".
Losses from their "business" had been reducing their taxable income to a small number for several years. I gave them a headsup on the hobby issue because they needed to know they might lose the deduction of their "business" loss off their W2 income at any time, and they needed to be prepared to address that issue financially should it arise.
I can use my imagination and see where auditing/msing could be used in the same way. If I had a substantial regular income and wanted to reduce my tax liabilities, I could take weekend vacations, do a shop while there, and claim all the expenses. This would be similar to the barrel racing scenario, and might briefly fly. However, I don't think that's what most of us do. Some of us are working full time at this, but most of us are trying to pick up a few dollars here and there. In most cases, we don't pay much tax if we take all the legally allowed deductions. At the same time, if we're not doing the vacation scenario or something similar, we don't have large losses that will offset regular income.
It can never be to your advantage to report this as a "hobby" unless it is a "hobby". As long as you consider this as work and as a business, you should report it that way. I recommend that you don't get yourself into a situation where a loss from doing this is offsetting regular income, but that's just a personal preference and not tax advice.
After all legal deductions, my own personal MS business does not show enough profit to generate added income taxes. In my case, mystery shopping money is added to social security and a modest amount of income from small investments. I suspect that most of us are not adding our mystery shopping money to substantial W2 money, so it is not providing the type of offset the IRS would regard as suspicious. We all have to make our own business decisions and this is not tax advice, but odds are my little business will not be considered a hobby.
Mary Davis Nowell. Based close to Fort Worth. Shopping Interstate 20 east and west, Interstate 35 north and south.