How are you guys counting groceries on your taxes? I'm not sure how to do it.

For example, multiple grocery shops I do have a flat fee, no reimbursement, but a required purchase. Can I count the entire thing as an expense (up to the fee) or just the cheapest thing I buy? I'm not sure the right way to handle it. Obviously, if I buy $70 dollars of groceries on a $20 fee, I realize I can't claim it all as a business expense (I wish!) but I'm confused on how to handle it otherwise. Up to the fee? On other shops, I occasionally claim negative number (reimbursement only if I go over) but I'm confused on groceries. I wouldn't buy groceries at any of places I shop, normally, but I also have to buy groceries regardless so is it really a business expense?

Edited 1 time(s). Last edit at 02/25/2014 03:48AM by kissum.

Since there is a required purchase you will have a 'business expense' to deduct. I would work on the premise of 'be reasonable'. Normally on a shop such as that the fee would be about X with the reimbursement being about 2X. So claiming as an expense somewhere in the range of $14 on a $20 flat fee would not be inappropriate.

The grocery shops in my area is very specific. The reimbursement is $10 and the fee is $8. You can deduct up to $10.

Correct, cubbiecat. It is when it is a flat fee shop with a purchase requirement that you need to look for 'reasonableness'. A fee + reimbursement shop has the reimbursement amount received as the business expense so there really is no question there.

Best advice is to consult the tax professional preparing your return. If you self-prepare, sift through the answers you get from all sources, then make an informed decision.

Wow the reimbursement amount is tax deductible when we shop? I did not know that but thankfully I've been using a spreadsheet I found here on the forum to keep track of my shops. If this is true I will take on more purchase required shops.

Yes, it is a deduction on your Schedule C if you have claimed the full amount received as "payment". So the check or Paypal was $20 to pay/reimburse you a $7 fee and a $13 reimbursement. If you claim the full $20 as income then the $13 reimbursement deducts. Eventually you are responsible for taxes only on your fees. If on your tax return you only claimed the $7 fee to start with, the reimbursement would not be a deduction.

Has anyone ever been told by a knowledgeable tax advisor that it would be better to claim everything and deduct the reimbursement, rather than separating fee and reimbursement?

I looked at the glasses shop, where you buy them and ship them back, and it seems to me that that situation would make anyone think that you shouldn't have to declare reimbursements as income.

Of course, when they pay you a flat fee, then you have to treat it as income/expense.

I have a knowledgable business accountant but I haven't talked to him about mystery shopping yet. I'm due to go in next week and should ask him to clarify some questions while my shop count is still low and organizable. It definitely makes a difference, I haven't accepted a lot of shops because it was only reimbursement or the reimbursement is 25 and the shop pay is 3.00. I haven't done a lot of restaurants for that very reason, so once I get his answer plus the advice here I'll make a decision.

Here's one thing I've wondered about reimbursement-only shops. If they don't pay you anything, in essence they're trading you the food in exchange for your work. And, as I understand it, when you trade services, legally they're completely taxable.

That would be monumentally unfair, but has anyone had a tax man say anything to the contrary?

On all of this stuff I would strongly suggest that YOU read the tax code and make YOUR decisions about what is and is not allowed. IRS is unlikely to penalize anyone who is acting in good faith based on what they can determine from reading the rules and regulations. And you will find that an outfit such as H&R Block doing taxes will claim things that go against the regulations but are based on judgments of Tax Court. And you will find that CPAs and accountants differ enormously on their interpretations as well. There is one MSP that counts as TAXABLE INCOME to ME the Paypal fees THEY are charged to pay me because that is what their CPA told them to do. And then of course there are the MSPs where the accountant or CPA tells them that every cent they send to a shopper needs to be reported as income to the shopper. We can only try to understand what the h*ll some of these folks are doing and try to report the best we can. As for 'tax man' advice, EEEK! I have known of shoppers who work and shop being told by their 'tax man' that they can 'just claim half of your mileage for the year as for shops' or 'no, since you work you can't claim any shop mileage' or 'you can only claim mileage if you are claiming a home office'. All of these you will see are bull if YOU go back and read the rules and regs.

Ishmael, I am perfectly happy treating a reimbursement only shop as just that--a shop where there is reimbursement only. I will even 'lose money' on the shop because I will also deduct mileage. This is why I do so many shops that overall have excellent profitability because they will offset and my business will bottom line show a profit. My reasoning is this: I am advancing cash on behalf of the MSP and that cash is "at risk" of the shop being unreimbursed. I have contracted to perform the job and my failure to perform would be a breach of that contract with outcomes that could impact availability of future work. And even if I perform the job correctly and report it, the shop could still be rejected. If I am late in reporting it the shop could be rejected. If I shop the wrong location or the wrong time or fail any of the other requirements of the job it could be rejected. A shop with a requirement that cannot be done can be rejected. And I have even had companies go out of business not paying me for work accepted.

And because money is involved, shops are not barter (which is what IRS wishes to tax). If you and I work out a deal aside from a monetary system where I as a roofer repair your roof in exchange for you giving me your old car, that is barter. As a roofer I am attempting to avoid taxable income to my business by doing your roof for 'free' while getting your car for 'free'. While the line may seem sketchy, the mere fact that you are "at risk" to lose your cash with your shops, this is reimbursement from work.

Thank you so much for your input on this Flash. I appreciate it.

Let me add, keep your receipts!

Keep a record of your miles; a written, current record is a requirement. Without it, the entire deduction may be disallowed.

cease

Flash Wrote:
-------------------------------------------------------
> On all of this stuff I would strongly suggest that
> YOU read the tax code and make YOUR decisions
> about what is and is not allowed. IRS is unlikely
> to penalize anyone who is acting in good faith
> based on what they can determine from reading the
> rules and regulations.

This is the best advice anyone here can give you. I am a tax preparer myself for the past 15 years and have done all kinds of returns, taken classes, been tested -- and I would not want to see anyone here taking any advice I gave you and trying to apply it because everyone's tax situation is different. The decisions a single adult with no kids and only mystery shopping as a source of income would make are not the same decisions that a married couple with kids and two W-2 incomes in the household and mystery shopping as a sideline would make.