I did a reimbursement only shop lately. I was supposed to purchase a skin care product and get up to $40 reimbursed. However, any skin care product at this boutique is above $55. So I ended up spending $60 with tax. That is $20 out of my own pocket. I did not mind paying the extra $20 when I signed up the shop because I use their products anyway. Now I am just wondering can I claim the $20 when I do my income tax as a business related expense? Since the purchase is a requirement for this shop and the $20 expense is a must to do the shop?
@MA Smith wrote:
If you can prove its a business expense, hit it. I can't prove the cosmetics I purchased last month are a necessary expense. They are, but trying to prove that to the IRS, isn't on my bucket list.
Thank you so much for everyone's time and reply. After reading all the replies, I decided not to claim the $20 on cosmetic product. I do more reimbursement shops than fee shops, becuase I don't need to pay tax on the reimbursement. I don't make a lot of income from mystery shopping business when I do my income tax every year. If I started to claim this $20 here and there, then I may not have any profit from MS business on tax return paper. This would make my file looks more suspicious to the government and increases the chance for audit.
It is my understanding that the whole 3 out of 5 years is not a set in stone rule. What that is for is someone who has a hobby that they try to make a profit on to recover part of the costs of the hobby. Anyone who has a legitimate business that they can show there is intent to make money doesn't have to worry about it.
Are you tracking income and expenses? You said "expenses," but I assume you're tracking income as well?
@CeciliaM are you using YNAB software by any chance? .
... if it's groceries, gas, or something I would buy anyway, I split it into two categories--"Secret Shopping" for the reimbursable amount only. If it's an item that I'm purchasing just to prove the shop, overage on a meal, or an expense that I'll use for shopping, then I put it in the "Secret Shopping" category. I also place all my MS income into the "Secret Shopper" category so that I can see if I'm operating in the red or black.