Okay, let's back up a bit. Johnb is talking about Itemized deductions, which have nothing whatsoever to do with the Schedule C. he can file a schedule C and take his *business deductions* there and still have the Standard deduction available to him.
The first computation he needs to make is to calculate his business income. Simplistically, that is:
Gross revenues = all fees and reimbursements received from all the MSC's whether there is a 1099 or not.
Business deductions = mileage deduction, cost of purchases required by shops, whether specifically reimbursed or not, cost of paper, toner, equipment bought just for mystery shopping (if over $100-200, consider depreciating it), and maybe a home office deduction (which I won't get into here).
The first figure minus the second figure is your Business Net Income (or loss). This is the bottom line of the Schedule C and carries onto the front of the 1040 to be added to (or subtracted from) your other income to produce your Adjusted Gross Income.
In between, if you have a profit, there is SE tax to be computed which is about 15+% of that figure. So if you have $1000 net business profit, you will pay about $150 in SE tax. Half of the SE tax becomes a deduction on the front of the 1040, reducing the Adjusted Gross Income.
From Adjusted Gross Income, you subtract either Standard deduction or Itemized deductions, and then you subtract your exemptions for yourself, your spouse, your kids. That gives you Net Taxable Income.
If that is a negative number, you will pay no Income Tax. But you still have to pay the $150 SE tax. I won't get into Earned Income credit that might apply that could make that go away. Plan on paying it until you know otherwise.
If that is a positive number, you will pay Income Tax in addition to the SE tax.
Okay, jilummer is talking about business deductions. Under the scenario you proposed, you would be deliberately trying to create a business loss to subtract from your other income. Under this scenario there would be no SE tax, and the taxes you would have paid on your (for example) $40,000 salary from your day job would be reduced by $11000.
****Yes the IRS frowns on this.**** It is "allowed" if you are legitimately trying to make a business profit but had a rocky start, but that means you would *not* be deliberately driving 20,000 miles after losing propositions. Certainly early in the learning curve, we have all driven to do a shop and later done the math and figured out we just paid to do that shop and ended up with nothing in our pocket to show for it. But if you're running large losses (and $11000 is a large loss) and don't change your business model pretty quick, yes, they can disallow the deductions (even retroactively, so don't assume you got away with it the first year if you don't get audited right away) on the grounds that you had no intention of making taxable income.
If you're going to do this, either do it to try to make money at it and try to end up with a positive number on the bottom of the schedule C, or do it as a hobby. But with a hobby, all the income is taxable and the expenses go on the Schedule A and are capped equal to the amount of income. So with a hobby, the best outcome you can get is to break even. You cannot create a loss. But you also don't pay SE taxes.
I would suggest both of you sit down with a tax preparer or at least get a copy of Turbo Tax to play with so you can see how the figures are entered and where the results feed to and what it does to the bottom line.
Keep all records, receipts, and shop documents showing where you went and what you were paid. Throw nothing out until you have done a few of these tax returns and know what was or wasn't needed.
And if you couldn't follow what I said above -- get help. Mistakes on a tax return can be extremely costly.
Time to build a bigger bridge.