Hey all what are some ways that I can get started organizing my tax information for mystery shopping for next year?

I just finished my taxes and I would like to get a jump start on next year...

Take a look at your Schedule C. You are going to have the same categories for expenses for next year as are on the form this year.

You know that your biggest deduction is going to be your mileage. Make sure you either keep a good log in your car or on your spreadsheets or as some ongoing written record. It is good for 50 cents per mile for at least the first half of 2010 (sometimes there is a mid year change effective July 1 if gas prices have significantly changed).

If you pay tolls or parking to shop, keep track of these as they are deductible.

Keep a folder of the receipts for your supplies and equipment purchased during the year.

When you have a "fee only" shop with a required purchase, make a note of the cost of that as it is an "unreimbursed business expense". Similarly if you do a shop where you are required to purchase an X and reimbursed "up to" an amount that does not cover the cost of that required purchase, the overage is an unreimbursed business expense. Make a note of this on your shop sheet or some other convenient place because the unreimbursed expenses can mount up.

And of course keep track of your fees and bonuses because these are taxable.

I make a habit of having all of this information except supplies and equipment on my shop log spreadsheet. When I accept the job I fill in the job information (dates, times, client, location, company, fee, bonus, reimbursement and any notes). When I finish the report I fill in the mileage, the date reported, a reduction of reimbursement if I didn't spend to the max, and any unreimbursed amounts. When I get paid I note the date paid and the amount paid (i.e. any fees plus reimbursements).

I am looking over the mystery shopping companies that are under $600.00, I just found one that totalled to $596.00 plus $47.00 reimbursed expenses. So far, I have not gotten a 1099.

And you probably won't, kittybratt. Reimbursements are not taxable so are not income to you. It is $600 or more in income that generates the 1099.

My accountant told me that reimbursements are taxable if they are for expenses that I would otherwise incur. Just because a company doesn't issue a 1099 doesn't mean the amounts they pay you aren't income.

Everyone should go by the advice of their own individual tax provider, whatever/whoever that might be. If your provider tells you that, joytron, it might be something to do with your own tax situation. It certainly is not the case for all of us, and we each have to live with the ramifications of a poorly reported income tax form, should we and the IRS find ourselves at opposites sides of the table.

I've been reading some of the other categories about $3 gas shops. He said that when you take a shop that doesn't pay a fee, but only reimburses or doesn't cover your cost of getting there, it shows that you're not trying to make a profit. If you don't make a profit in at least some of the years, it might be a hobby which is really bad news.

Which is why everyone needs to follow the advice of their own provider.

IRS is very clear with their guidelines that a business is suspect in its legitimacy if it does not show a profit 3 out of the preceding 5 years. It is not the only criteria they use. They are also looking at appropriate record keeping and other aspects that could lead them to a determination of whether you were operating a business. The ramifications of being a hobby is that it comes off of a Schedule C and goes onto a 1040 as 'other income' and you don't get to deduct mileage, etc.

Flash Wrote:
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> IRS is very clear with their guidelines that a
> business is suspect in its legitimacy if it does
> not show a profit 3 out of the preceding 5 years.
> It is not the only criteria they use. They are
> also looking at appropriate record keeping and
> other aspects that could lead them to a
> determination of whether you were operating a
> business. The ramifications of being a hobby is
> that it comes off of a Schedule C and goes onto a
> 1040 as 'other income' and you don't get to deduct
> mileage, etc.


I think that is what he was talking about. For reimbursement only shops, wouldn't it ALWAYS be a loss? You're almost always going to have mileage (unless you live in an apartment above a restaurant)

Anyway, I count my reimbursements as income unless it's something that I wouldn't otherwise buy (i.e. the required deli purchase at the grocery store).

It makes things a little more complicated, but it helps me justify my mileage.

Is there a topic somewhere discussing the restaurant shops where you only get a gift card for your time? I only work for CASH!!!

No, it is not "always a loss." Your tax-provider should be talking to you about the total $ you make for the year, not on one specific job. You will lose money on some jobs and make money on others. You will have expenses that you should be deducting from your income. Then you figure your taxes. If you never ever do any jobs that pay you cash for doing them, then your situation is different. But you would not claim the reimbursements as income, either, according to what I know. However, again, each person should be listening to their own tax provider.

There are a number of areas where IRS is not clear and some of these are what ends up in Tax Court for clarification. Reimbursements are not one of those areas.

Ultimately if you are audited, what will be necessary is clear, clean, consistent records of your business. Because I prepare my own returns, I go to a level of detail that a paid preparer could not/would not do because it would be cost prohibitive. I list every cent of every job I do during the year (I am an accrual taxpayer, not a cash taxpayer). This includes fees, bonuses and reimbursements. This gives me a top line that is more realistic for a "business". I then deduct my reimbursements as a line item and, of course, the rest of my expenses. I am, of course, ready to document, explain and justify how and why I have done what I have done. And the records all start with my shop logs.

Over the years there have been slight modifications of my shop logs every year as I add more information that proves useful and delete information that is not so useful. But the main 'meat' of shop information has remained consistent throughout. I have all the bank statements showing direct deposits and deposits. My records show what checks (both personal and business) were in each deposit. And of course Paypal shows what moneys have arrived that way. Overall my business has showed a small profit every year but 2008 (when mileage deductions were so large). It has never been my goal to have my Schedule C business 'entitle' me to the Earned Income Credit. And whether the business is a Schedule C or an S Corp, mystery shopping or manufacturing widgets, the goal is the same, to maximize the benefit while keeping the taxable bottom line in bounds.

dee shops Wrote:
-------------------------------------------------------
> No, it is not "always a loss." Your tax-provider
> should be talking to you about the total $ you
> make for the year, not on one specific job. You
> will lose money on some jobs and make money on
> others. You will have expenses that you should be
> deducting from your income. Then you figure your
> taxes. If you never ever do any jobs that pay you
> cash for doing them, then your situation is
> different. But you would not claim the
> reimbursements as income, either, according to
> what I know. However, again, each person should
> be listening to their own tax provider.

How is it not ALWAYS a loss? If you go to a restaurant and are reimbursed for your actual cost of meal, tip, taxes, valet, etc. and receive no fee for your report. Unless I'm walking to the restaurant, I have mileage which is not reimbursed. Therefore, it is a loss. $35 Reimbursement less $35 Meal cost less $2.00 in mileage (it's very close) equals a $2.00 loss for that particular job.

Now, say it was a restaurant at the mall and you're already at the mall doing another job and you don't have any extra mileage. You receive $35 Reimbursement less $35 for Meal cost and your Profit is $0. You don't have a loss, but it's break even at best.

I understand that retail stores often use a loss leader to entice shoppers into their stores to buy higher profit margin items. So, for a mystery shopper, the theory would be to take loss jobs in order to build a relationship with a scheduler in order to get higher paying jobs. I understand that too. I just don't understand taking jobs that will automatically result in a loss on a regular basis. To me, it seems contrary to the principles of running a business for a profit.

It is not always a loss because you might have grouped shops. It is not a loss if it added to your lifestyle.

It might be a loss on mileage, on that one shop, but then you need to look at the whole year. If you don't want to do reimbursement only fine dining because for you it does not meet either of the first items I put, then avoid it. My point was that your accountant was focused on the trees, and should be focused on the forest. The forest is the entire year in total.

edited to add...you also need to look at what you are getting. I did a reimbursement only FD recently that cost me money, because we spent over. The report took an hour. Was it worth the $150 I got in reimbursement, heck ya. FD to the max. It was something we would not be able to do, but would want to. So it added to the lifestyle, the iPhone recorded the events of the evening, which is legal in my state, and I got the equivalent of a fab meal for $25 and an hours work for $150 reimbursement and less than a dollar's worth of gas. Tip, valet, etc was covered.

On the other hand, the same weekend I did a lower end restaurant with reimburse only, iphone recording, spent $25 less than was allowable, and spent ****5 hours**** writing the report, $2 on parking, and $4 to get the validation for the parking. I had a wonderful evening with my best friend, and would never ever ever do it again. The report was strange, and repetitive. The food was mixed good and awful. The service stunk. We would have had more fun at McDonalds when I figure in the final equation. But now I now I will not go back to that restaurant for work or fun, and I will do no more reports for this MSC even for FD, as it was way more work than it should have been.



Edited 1 time(s). Last edit at 02/03/2010 08:13AM by dee shops.

IRS sets up their rules and guidelines only to implement what laws Congress has enacted. The rules are not precise and exact for all circumstances, so are left open to a fair amount of interpretation until/unless a specific situation is brought before Tax Court to rule. And in some cases the Tax Court rulings go against IRS rules and guidelines so a taxpayer can even comfortably go against IRS rules citing the Tax Court's precedents.

I am in total agreement that a zero fee reimbursement shop looks like and smells like the reimbursement was payment and the job was performed at a loss. That is just common sense. But that is not the IRS rules. If it was, I would have a whole stack of 1099s on my desk rather than just a small handful. 1099s are issued for fees paid and never include reimbursements.

IRS is less interested in specifics than in overall profitability of your company. Any business will provide goods or services at no profit or at a loss from time to time. IRS really is, as Dee Shops mentioned, looking at the forest rather than the specific trees. If overall your business is turning a profit and you are running it in an overall business like manner you are unlikely to be deemed a hobby. If you are unfortunate enough to get an auditor with a chip on their shoulder, they could make your life miserable even if everything was documented and correct--that is why there is the right of appeal built into the system.

When you talk with a tax preparer or accountant, phrase your questions carefully. Ask "Are reimbursements taxable?" Don't be specific or leading, such as "Are grocery reimbursements taxable?", "Are gas reimbursements taxable?", "If I am not paid for a job with a fee, is the reimbursement taxable?" You are not looking for a common sense answer to a specific but the IRS rules. A reimbursement is a reimbursement is a reimbursement. ***It is repayment of money you are required to spend to perform a job, without which expenditure the job is invalid.*** It doesn't matter whether it is the purchase of a bow and arrows which you would dispose of before going home because it would be dangerous if it fell in the hands of your child, a gourmet dinner, $1 in gas when your car is on fumes, eyeglasses you need or a ff burger you sample and give/throw away.