MS & IRS...HELP

I am a current mystery shopper and just realized through research that I am suppossed to be paying taxes on my earnings. I was under the impression that as long as I made $600 or less from each MS company that I worked for then I was okay. Can someone help me get started? I keep a spreadsheet of all the jobs that I do and payments receive...but it was real splotchy the beginning of the year and I only became serious from September 2012 - now. What do I need to do? What information do I need to keep? What is the IRS looking for? What deductions are an Independent Contractor can I take? And what records do I need to keep in order to prove all of this? I'm at a loss because I know you don't play with the IRS, but don't know where to start. Can someone please provide me with an answer or point me in the right direction?

Nicole S.
Maryland

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My suggestion is to look at the stickey notes for new shoppers. I found that to be really helpful.

Little lady shopping Southern Louisiana & Mississippi. smiling smiley
Hi, Nicole, welcome to the forum. Check out "Mystery Shopping and taxes" under the New Mystery Shopping area.
Contact a tax preparer and discuss it with them. I hope you've been tracking your mileage all this time.

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I pray it does not occur that the last thing I did before I died was vacuum the house or eat broccoli.
@nikelflan;
You had the right number but the wrong range of application. It is $600 gross receipts total from all taxable sources combined not per company.

You will owe the self-employment tax on every cent you are paid minus the deductions allowed and minus the credits applied. You should keep every receipt for every cent you had to pay out a in making your income.

Believe it or not your best source of information is the IRS. You can go to their offices and just have a conversation with them. They are very helpful until they become convinced that you are deliberately misrepresenting your income in order to not pay the taxes due. They have numerous publications that list applicable deductions for people who have a taxable income from self-employment.
You might want to start by looking over the IRS Publication 334 which is available for free at:
[www.irs.gov]

I get the best tax advice from the IRS and I get it for free.

Shopping South Texas where there are miles and miles between each of the miles to every shop.
The $600 figure is the threshold at which you get a 1099, and it's PER COMPANY. The only "aggregate" figure that is relevant is that if your total self-employment earnings are below $400, you don't have to pay the SE (Self employment) tax on those earnings. But you still have to report all your earnings, even if it's below that figure, unless that's the only income you have at all. Otherwise you would still have to pay income tax on them, even if not the SE tax.

As I said before, talk to a tax preparer. Reading the IRS publication on self employment income is a good start, but it can be hard to understand what they are saying without expert guidance. I went to a tax preparer when I started my pet sitting business and it was a huge help in understanding the rules.

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I pray it does not occur that the last thing I did before I died was vacuum the house or eat broccoli.
Starting after the first of January there will be shops for tax preparationwinking smiley

Equal rights for others does not mean fewer rights for you. It's not pie.
"I prefer someone who burns the flag and then wraps themselves up in the Constitution over someone who burns the Constitution and then wraps themselves up in the flag." -Molly Ivins
Never try to teach a pig to sing. It's a waste of your time and it really annoys the pig.
Some of those tax prep shops pay pretty well, as I remember. And since I plan to have someone else do my taxes this year, this would be great. Especially since I think I've done my taxes wrong the last few years. sad smiley

But I think there was a requirement that you had to know that you were getting back a certain amount, and I have no idea what I would be getting, if anything.

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"Between stimulus and response, there is a space.
In that space is our power to choose our response.
In our response lies our growth and our freedom."
~Viktor Frankl
There have been two H&R shops on the boards in my area for several days, but you can't do them until last 10 days of January. They require you to get a refund anticipation loan and your refund has to be at least some certain amount of money. I can't plan that far out (I'm traveling in that window of time) and can't be sure I'll be ready to do my taxes by then. I have two businesses, rental income, and have to wait for a W-2. Not sure I'll have all my 1099's by then. But I'll be watching the board. I expect other sites will come up other than those two eventually.

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I pray it does not occur that the last thing I did before I died was vacuum the house or eat broccoli.
H&R's first wave of tax prep shops released last week. One requirement is a minimum refund of $300. It's a refund check. Not a loan, and the refund will not be within 24 hours. If eligible, and there are no offsets, IRS indicates the refund will be within 21 days.

Use your shopping skills to wisely choose a tax preparer. It's important.
I've never known H&R to be known for highly trained preparers. I knew a guy who worked for them. He took one class, passed their test, and they hired him for minimum wage. Not a lot of experience, and he was pressured to sell other products -- life insurance, etc., to get bonuses.

If I do one of these H&R shops and don't think the guy did it right, I'll have my usual tax preparer amend it, LOL. In fact I'll probably pay her to review the return even if I don't think they screwed it up.

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I pray it does not occur that the last thing I did before I died was vacuum the house or eat broccoli.
It was interesting that H&R Block came up. Back in the dark ages [1970's before computers], I was in an accounting class and the professor had some date from a national publication that showed if H&R Block did your taxes, you had a statistacally higher chance of being audited. Don't know if that's true now, but it was interesting back then.

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Have PV-500 & willing to travel.
"Answers are easy. It's asking the right questions which is hard." (The Fourth Doctor, The Face of Evil, 1977)

"Somedays you're the pigeon, somedays you're the statue.” J. Andrew Taylor

"I have never met a man so ignorant that I couldn't learn something from him." Galileo Galilei
Itsasecret nailed it. Shoppers need to ignore P T Burke's post. You need to file schedule c and don't forget mileage, which for me is more tax advantageous than actual.

Not my circus - Not my monkeys @(*.*)@

~Polish Proverb~
I haven't seen the H&R shops with the MSC they used last year, in my area, yet.

Are you allowed to have your taxes done as a mystery shop, if your income sources are all going to reveal that you're a mystery shopper? And don't you have to list your occupation on your tax forms? Are you allowed to just say "self-employed" without being specific? I thought you had to be sure of getting a refund, too, as some others have mentioned.

Interesting about the H&R preparers, though.

Happiness is merely life's way of keeping you off-balance.
There are some beginner tax preparers at H&R Block and there are others with years of experience and training. In this case, you get what you shop for.

Mary Davis Nowell. Based close to Fort Worth. Shopping Interstate 20 east and west, Interstate 35 north and south.
The tax prep software by any one of the big purveyors, has a Q&A format that will easily walk you through the Schedule C that you need to file, and will ask the right questions. In=person tax preparers and IRS employees are not that good at sorting through self-employment issues and very, very, often get it very wrong. (Especially when it comes to advice about deducting mileage to and from our shops.) I use Tax Cut.

Based in MD, near DC
Shopping from the Carolinas to New York
Have video cam; will travel

Poor customer service? Don't get mad; get video.
My experience has been that if you don't understand what those software "interviews" are asking there's a good chance you'll answer it wrong. After you've done it a few years, maybe you'll know, but if you do it wrong once and don't have an "in-person" preparer to explain what you didn't understand, you'll keep making the same mistake over and over again. And you have to have your math done in advance. It will ask you "how many miles did you drive for this business" but you have to decide on your own what miles qualify and what miles don't and what miles you can't claim if you run personal errands on the route and what you can claim (per diem) if you travel out of town overnight. Tax software is like any other software program -- garbage in, garbage out. I would never suggest someone doing something for the first time (like starting a home-based business) try to go it alone with some off-the-rack software. It may ask YOU questions, but you can't ask IT questions, especially if you don't know what questions to ask.

I had a pet sitting job last year that took me 200 miles from home for a week and if I hadn't had my tax preparer to explain about per diem rates, I would have really shortchanged myself on the daily meal deduction.

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I pray it does not occur that the last thing I did before I died was vacuum the house or eat broccoli.
At tax time, does each company send us 1099 and a statement showing Fees and Expense Reimbursements? That will really be helpful, so we don't have to add up all our receipts. To this, we can still deduct mileage, at ___ how much per mile now? I have to check with IRS. It used to be 0.55.
MaryL, the IRS requires a company to send a 1099 to a contractor who has reached the $600 amount. I have never received a 1099 from a company for less than $600.

Mary Davis Nowell. Based close to Fort Worth. Shopping Interstate 20 east and west, Interstate 35 north and south.
maryl,
If you just deduct mileage, you may be missing a lot. It's time to actually look at a blank Schedule C and the instructions for it to get a better sense of all of this.

You cannot count on the MSCs to send you accurate 1099s because some include nontaxable reimbursements and some do not. If one paid you less than $600 they do not send you a 1099, but they report it as a cost of business (so the IRS is aware) and you MUST report the income.

Based in MD, near DC
Shopping from the Carolinas to New York
Have video cam; will travel

Poor customer service? Don't get mad; get video.
How about if the company itself is audited...you better believe they can track everywhere payments went.

Just be honest and then there's no problem.
According to IRS and my state's tax codes, I should also be paying tax every time I hold a garage sale, get rid of a sofa on Craigslist, do a little chemistry tutoring on a Sunday night as well.

OK, hands up - who has ever paid taxes on their yard sale or Craigslist income?
You rarely have a PROFIT from a yard sale. If you sell something at a PROFIT (sell it for more than you paid for it) then the profit is a capital gain and you are supposed to pay tax on it. If you sell your old $500 couch for $50, trust me, the IRS does not want to know about it and you can't deduct the loss.

If you sell a couch you bought for $50 for $500, they DO want to know about that. But it's not business income (unless you have a used furniture store), it's a capital gain. It all has to do with profits.

Don't know where the chemistry tutoring comes in but you can be sure that will be taxed in some way.

Not knowing where MissyH lives I can't speak about what her state wants, but I went over all this with my tax preparer two years ago when I was selling junk on eBay just to clear out my closets, NOT as a business, and that's when I learned the difference between capital gains and profits from selling, say, Avon products where you are doing it to make money and have a business. (We also went over hobby stuff.) My state doesn't tax anything the IRS doesn't tax.

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I pray it does not occur that the last thing I did before I died was vacuum the house or eat broccoli.
You're right, if I sell my $500 couch for $50 then I don't have capital gains.

But (hypothetically, of course) if I go to estate sales and buy vintage merchandise for $25, then resell it after a few months on Craigslist for $100, I should pay taxes. Ditto if I tutor a nurse in chemistry on a Sunday night at Starbucks.

It all makes my head ache.
Can we deduct expenses, such as food, beverages or goods, even though we benefitted from it? In other words, it is not just used for business. We did consume it. It is not like boxes and goods I bought to mail in post office shops. It was all mailed to a food bank. I did not benefit from that, so that's very clear. They were solely used for business, therefore entirely tax deductible.
You can feed yourself at home for 50 cents. If you're buying a $9 FF combo with a drink because you HAVE to for the shop, you haven't benefited from it just because you ate it.

If you go to your mother's house and she feeds you, do you pay taxes on that?

If you go to your regular job and there are donuts and you eat one, do you pay taxes on that?

Think of it in those terms. The food you're buying belongs to the MSC who required you to obtain it so you could evaluate it. After you evaluate it, they have no further use for it, so they let you eat it. (You don't HAVE to eat it, other than to test the temperature and taste.)

If the MSC wants to give you free food after THEY are done having it evaluated -- no, it's not taxable to you.

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I pray it does not occur that the last thing I did before I died was vacuum the house or eat broccoli.
Reimbursements of REQUIRED purchases are NOT taxable income. So, if you are required to purchase a meal consisting of certain items, or a general list of items (two entrees, etc.) the reimbursement is NOT taxable income.

PLEASE go to the New Shoppers area and find the MS and Taxes topic, near the very top of the topics list there. Read, read, read.

Based in MD, near DC
Shopping from the Carolinas to New York
Have video cam; will travel

Poor customer service? Don't get mad; get video.
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