So, in trying to be proactive about taxes this year I thought of a few mystery-shopping related tax questions...
A mystery shop company will pay $30 to go try on and purchase a dress from an upscale boutique. The shop instructions dictate that you MUST purchase a dress from the boutique. The instructions also say that you MAY choose to return the dress, or you can choose to keep it. I choose not to return it.
Can I claim the dress (Let's say it was $100) as a work-related expense, and deduct it from my taxable income in the following year?
Since you have the option to return the dress it would not be an unreimbursed business expense. Mileage to return the dress would, however, be business miles.
Edited to add: Lets take the same scenario $30 fee to purchase a $100 dress that you can not return and for which you will not be reimbursed. IRS could question whether this was indeed a business transaction or whether your 'business' was really a 'hobby'. If you could point out that acceptance of this piece of work allowed you to perform many more future shops for the same company that led to a substantial taxable profit from the company, they might decide it was a viable business decision.
Edited 1 time(s). Last edit at 11/02/2015 04:45PM by Flash.
I'm glad this came up because I've been curious how people deduct mileage. In standard commuting work obviously you can't deduct mileage from home to work, its called commuting. But with mystery shopping, do you take mileage from home to the first mystery shop? Obviously from shop to shop is allowed but I'm curious about the home to first location, since technically I guess your office is out of your home.
If you have no other regular place of work the mileage deduction is door-to-door. You are working from home, though you may not actually be claiming a home office on your return. (Caution about claiming a home office as there are specific criteria it must meet, such as an exclusive use space. You can claim your equipment without claiming a home office on your return. If you own and claim a home office, you will be depreciating that portion of your home, which will lower your cost basis when you sell.)
Commuting mileage is not deductible if you have a normal place of business. So a salesman, for example, goes to his office to pick up his call sheet for the day. He returns to his office at the end of the day to turn in his paperwork. His mileage between his home and his office is not deductible because it is a commute. From the office he goes to visit clients A, B and C. The mileage from his office to the clients and back to his office is 'business mileage'.
A part timer works the mornings for company A and then goes to company B for the afternoon. Home to A is 'commute', A to B is 'business mileage' and then IRS gets vague whether the part timer needs to claim A to home as 'commute' or B to home as 'commute' if he/she does not return to A before going home.
The part timer situation above is where someone with a regular place of work who shops on the way to work, on lunch hour or on the way home gets touchy. A reasonableness approach I think is what is called for here in absence of specific example from IRS and unwillingness of IRS to give a specific answer (and believe me, I have tried). If it is 8.6 miles to work, you have 17.2 miles of 'commute' for a round trip. If from your driveway to work and then to shops and home has a total of 22.2 miles on your odometer, I would call 17.2 miles 'commute' and 5 miles deductible business miles.
I have never found anything in IRS statement or example that would contradict this approach and each year I read the guidelines to see if there have been any changes or clarifications.