Paying taxes as a shopper

Do mystery shopping Companies send us any kind of forms at the end of the year for tax purposes. .

Edited 1 time(s). Last edit at 06/23/2016 11:59PM by MScat.

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You will get a 1099 from most companies if you exceed $600. They provide no detailed per visit breakdown.Less than $600, you get nothing.

Start a spreadsheet and track each shop.
Also, remember that whether they send you any information, you need to declare the income. You may want to read the Tax thread near the top of the topics list at New Mystery Shoppers.

Based in MD, near DC
Shopping from the Carolinas to New York
Have video cam; will travel

Poor customer service? Don't get mad; get video.
If they pay you by PayPal, they will not send you a 1099 even if you make more than $600. PayPal will send you a 1099 if the following is met: "PayPal is required to report gross payments received for sellers who receive over $20,000 in gross payment volume AND over 200 separate payments in a calendar year." [www.paypal.com]

Shopping Southeast Pennsylvania, Delaware above the canal, and southwestern NJ since 2008
@myst4au wrote:

If they pay you by PayPal, they will not send you a 1099 even if you make more than $600.

I don't think that's accurate. The company owes you a 1099 if you make the required amount from them. Doesn't matter how they pay you. I get 1099's from all the companies I work for that pay through Paypal.
@SteveSoCal wrote:

@myst4au wrote:

If they pay you by PayPal, they will not send you a 1099 even if you make more than $600.

I don't think that's accurate. The company owes you a 1099 if you make the required amount from them. Doesn't matter how they pay you. I get 1099's from all the companies I work for that pay through Paypal.

Steve is correct, the companies are required to send you a 1099 if you make $600 or more.

You as a taxpayer are required to report all income, regardless if you only made $20 each from several companies. This is why it is so important that you set up a spreadsheet to track your income from every company you worked for during the year.

Keep accurate records for other non reimbursed expenses. Those expenses include office supplies, meals, hotel, etc.

When I prepared taxes professionally, it took forever to get some of my clients to keep accurate records for their mileage. My mileage so far this year is over 5K for business purposes. That is a $2700 deduction off my schedule C. Some tax professionals may suggest you use depreciation. I do not recommend this because the govt want that money back when you trade in the car.

I suggest you download the full schedule C from IRS.gov. You may not need to file a full C, but it will give the information to help you save the most when January rolls around.

I'll probably get some flack about this next bit of information. I try to show a profit every year, because the IRS may decide it's only a hobby and the tax for hobby income is more expensive.

Sorry this is so long, but the OP is trying to be proactive and im only trying to help.

MaryAnn

Live your life in such a way that when your feet hit the floor in the morning; the devil shudders...And yells OH #%*+! SHE'S AWAKE!
@KevinE wrote:

You will get a 1099 from most companies if you exceed $600. They provide no detailed per visit breakdown.Less than $600, you get nothing.

Start a spreadsheet and track each shop.

Good advice about starting a spreadsheet. There are several companies I probably won't hit the $600 threshold for, so I do keep a spreadsheet. AND...some companies have a really helpful feature where you can see how much you have earned vs how much is reimbursement for the year. That comes in really handy at tax time if I haven't hit the $600 threshold...I can use those sites to double check my own figures.
I beg to differ. I copied a typical statement from one of the MSCs regarding payments and the provision of 1099 forms. One of the "benefits" of MSCs paying through PayPal is that the burden of providing 1099 forms shifts to PayPal. I have not received 1099 forms from any MSC which pays through PayPal since the IRS rule on third party settlement organization came into effect. The original intent was to make sure that sellers getting paid through PayPal were reported to the IRS (albeit the threshold is fairly high), but the same rule applies to payments from MSCs through PayPal. If the MSC and PayPal were both reporting payments to the IRS, this would create a really big problem for shoppers. An individual MSC wouid have no way of knowing whether the shopper reached the aggregate amount with PayPal. I edited this quote to remove the name of the MSC. Nothing else was changed.

"In accordance with all applicable laws, since all Evaluator compensation is provided via Paypal and Paypal is considered to be a third party settlement organization, the Evaluator will not receive any 1099 form for tax purposes from [MSC]. It is the responsibility of the Evaluator to procure and obtain all necessary documentation for the purposes of any federal, state, county, and other applicable tax requirements. Any information the Evaluator may require for tax purposes regarding the amount of compensation received can and should be obtained directly from Paypal by the Evaluator."

Shopping Southeast Pennsylvania, Delaware above the canal, and southwestern NJ since 2008
@myst4au wrote:

One of the "benefits" of MSCs paying through PayPal is that the burden of providing 1099 forms shifts to PayPal.

I think it really just depends on how the MSC tax preparers and legal advisors define the relationships and law, but understand that you are just talking about 1 MSC. I specifically have 4 that pay through PayPal and did send me a 1099. I only worked for 7 companies last year.

The issue is most likely due to the wording of the Paypal statement:
"PayPal is required to report gross payments received for sellers who receive over $20,000 in gross payment volume AND over 200 separate payments in a calendar year."

We are not sellers of goods. We provide services and receive compensation, as well as reimbursements through Paypal. That rule is set to to pretty much never trigger a 1099 for a shopper, because it was not intended for us.
I think that we can agree that some MSCs that use PayPal seem to be sending out 1099 forms and some companies which use PayPal seem not to be sending out 1099 forms. I found one example and provided it. Honestly. it is really not worth my time trying to compile a comprehensive list. The threshold for PayPal used to be lower and there was indeed one year when I got a tax form from them. Since the threshold rose to $20,000, I have not received a tax form from them. Since I rely upon an Excel spreadsheet to track everything, I can easily see what is happening.

I agree that the PayPal rule was intended for sellers and not for shoppers, but I think that shoppers and MSCs got caught in the net since PayPal does not distinguish among types of entities which are sending payments to me. When I look at my PayPal account, payments from individuals who bought goods from me are intermingled with payments from MSCs. To PayPal, money is money. We are IMHO simply considered sellers by PayPal. PayPal was set up to facilitate payments for goods. The fact that MSCs (and presumably others) have re-purposed PayPal does not really matter to them as long as everyone pays their required fees.

Shopping Southeast Pennsylvania, Delaware above the canal, and southwestern NJ since 2008
Here is the skinny on PayPay and 1099s, based on some research I did a few years ago when this became a hot topic among freelancers. The IRS has ruled companies are not required to send out 1099s if they pay for services through PayPal (or using a credit card, for that matter.) However, many companies still do it. Some companies are simply used to doing it that way. Others offer multiple means of payments, and it is more convenient to report them all on 1099s rather than separate out PayPal payments. Still others do it do help contractors at tax time and prevent a flood of requests for payment summaries. There is no rule or prohibition against sending out 1099s if you are not required to do so.

If you do happen to get 1099s from both PayPal and an MSC for the same payments (and I know of freelancers who have had this happen,) it should not create problems. PayPal uses a 1099-K, while the MSCs use a 1099-MISC. The IRS knows the 1099-K may include payments from the 1099-MISCs.
Plus it is irrelevant as the 1099s are not filed with the tax return anyway. Add to that that the 1099s are likely to be inaccurate whether you are a cash basis or accrual basis tax payer. Bottom line . . . keep good records of your taxable fees and your reimbursements and build your return from your records. If you receive 1099s there is a section on your Schedule C to claim those and then claim the balance from your records as earnings not covered by the 1099s.
I really, really hate Microsoft's database. The best user friendly data base is MS Works. I purchased a CD on Ebay for $7.99 and installed it. The easy way to create a data base is simple without stress. My data base includes the MSC, the company being shopped and the shop number. The next is what the shop pays divided by the time put in the shop including printing and reading the required guidelines that number is placed as a "holder' and when finished placed in the computations. I know know how much I am being paid per hour since the next number is amount paid divided by the number of hours. The next line are my costs. This line asks how many pages were printed. That number is multiplied by twenty-five cents. [12.5 ¢ which is the paper and 12.5 ¢ for the ink. Those amounts are placed in. I also have the time the shop started and ended and those times are placed into the calculation. When I am ready I will report the report. On some of the data names, below the name is the Schedule C number. So when I print the report it already has the number that corresponds to the schedule C.

Michael G.
Keep track of your mileage at a minimum.
With several grand in payments and reimbursements my mystery shopping income last year came to $377 after the mileage deduction.
Hi MScat,

Some companies do and some companies do not. They can send you a 1099-Misc even if it is under $600. I contract to about 14 companies in the year. My incomes range for the companies. I only receive a few 1099 Misc statements. I do record and report all my income. I also record and report most expenses. Since your question only asks about the MSC paperwork I will not speak about expense tracking. You can keep a track of your income in a cash receipts journal or Excel worksheet. In the worksheet you can have columns with date of receipt, company and amount. This would be minimum. In Excel you could easily order the worksheet by company. It is good to compare this to what they report anyway. I would not worry about minor differences and would report my numbers to the IRS.

Welcome to the world of mystery shopping. Good Luck!

Sandra P. Dunne
Phone Mystery Shopper
www.linkedin.com/in/sandrapdunne
As has been stated throughout this thread it i best to keep a spreadsheet of all jobs done. This is useful for many reasons including but not limited to tax purposes, lets you keep track of payments received and not received which can show when your missing a payment and need to contact a msp about it, knowing which shop is with what msp, lets you know where your at money wise in earnings for any period of time. I use open office but if you have excel that is good too. Basically any spreadsheet program.
I have gotten tons of 1099's from msps who pay only thru paypal at the end of last year. Some lump reimbursements and pay together.

Shopping Western NY, Northeast and Central PA, and parts of Ohio and West Virginia. Have car will travel anywhere if the monies right.
I cannot find the thread now but I saw someone post that if you get paid to drive somewhere .... you can claim the difference between what the govt pays and what you are getting. That is not the case. If you are getting paid mileage ....you get that .... period. You cannot claim the difference. For example if you drive for a company that is an IC and they pay you $.30 a mile. The govt reimburses IC $.575 a mile. You cannot claim the difference. Well actually you can, but that is not what you are supposed to do. smiling smiley
The government doesn't reimburse the mileage, they allow us to deduct the mileage. My experience with mileage reimbursement from mystery shopping companies is they usually do not differentiate between the portion paid for mileage and the portion paid for work. I include it all as income then take the full mileage deduction. BTW, the deduction is down now. I think it's 54 cents.

Equal rights for others does not mean fewer rights for you. It's not pie.
"I prefer someone who burns the flag and then wraps themselves up in the Constitution over someone who burns the Constitution and then wraps themselves up in the flag." -Molly Ivins
Never try to teach a pig to sing. It's a waste of your time and it really annoys the pig.
@myst4au wrote:

If they pay you by PayPal, they will not send you a 1099 even if you make more than $600. PayPal will send you a 1099 if the following is met: "PayPal is required to report gross payments received for sellers who receive over $20,000 in gross payment volume AND over 200 separate payments in a calendar year." [www.paypal.com]

I do not understand where this information is coming from, it's grossly inaccurate . All companies are legally required to issue a 1099 no matter how they pay you. If you have earned at least $600 from the individual companies; those companies are required to send you a 1099. You, as the taxpayer are required to report all income from every thing you have earned. Now if you are working this through a PayPal account; it still doesn't allow the companies you've earned over $600 a free ride. The companies are required by law to issue a 1099.

Let me illustrate an example; I work for a MSC and I only do one shop for them once a month at the most. My income is $180 a year. I'm still responsible for reporting the income even though I will not receive a 1099 for the income I received from said company. I just recently explained the rules to a family member, who was under the impression if it was under $600 he didn't need to claim the income. My income in my PayPal account exceeds the 20K mark that this poster has mentioned more than once on various posts.

As a former tax professional I cannot tell you how many times it broke my heart when I had clients depending on EIC and they couldn't get it because of the 1099 beeswax.

What I will tell you as a former tax professional is keep track of everything, is over the top important. Build spreadsheets, rework them if need be. Keep track of all your payments, your non reimbursed expenses and your business mileage. I never charged a client more for envelopes for every single expense they had every month. Then again, I've been paying income taxes since I was 5 years old and it's sort of a goal for me to be the IRS.

BUILD SPREADSHEETS! You can always modify them later on. SAVE EVERY RECEIPT!

Lastly, I will recommend anyone in this business visit IRS.gov and download a schedule C. The schedule will give you all the information you need for business deductions.

It's up to you to take control of your finance information. I don't discount a lot of great information on this site, but why not have it up front and personal?

My first year as a tax professional was working for the green block people. We were encouraged to sell you services that most filers never need. I made a ton of money that year.

Live your life in such a way that when your feet hit the floor in the morning; the devil shudders...And yells OH #%*+! SHE'S AWAKE!
Thanks Flash.

I'm going to try and post the actual address for downloading a Skd C.

Here goes.

[www.irs.gov]

Live your life in such a way that when your feet hit the floor in the morning; the devil shudders...And yells OH #%*+! SHE'S AWAKE!
As I said, the information comes from PayPal. If you wish to argue, argue with PayPal.

PayPal cites Internal Revenue Code (IRC) Section 6050W
"Internal Revenue Code (IRC) Section 6050W states that all US payment processors, including PayPal, are required by the Internal Revenue Service (IRS) to provide information to the IRS about certain customers who receive payments for the sale of goods or services through PayPal.
PayPal is required to report gross payments received for sellers who receive over $20,000 in gross payment volume AND over 200 separate payments in a calendar year.In order to help you understand these changes, we have prepared the following FAQs."

This change went into effect for Tax Year 2010. Maybe Section 6050W postdates your tenure as a tax professional. I don't know. All I know is that PayPal follows the policy shown on their own webpage. I really doubt that PayPal is broadcasting the fact that they are violating the tax code. Here is a direct link to an IRS explanation of Section 6050W. [www.irs.gov] This is actually a request for comments, but provides a good explanation. Another explanation can be found on the Thompson and Reuters Tax and Accounting Blog: [tax.thomsonreuters.com]

The MSCs who pay through PayPal appear to fulfill the requirements of being "Aggregated payees" as explained on the Cornell University Law School website: [www.law.cornell.edu] I can assure you that there are some MSCs which do not issue 1099 forms, and have not for several years since they remit payments via PayPal. Others have reported on this Forum that some MSCs which remit via PayPal continue to issue 1099 forms.

I personally do not worry when an MSC which remits through PayPal does not send me a 1099 form. I keep track of every penny in an Excel spreadsheet. I report every penny that I receive, and I deduct every penny that I can.

@MA Smith wrote:

@myst4au wrote:

If they pay you by PayPal, they will not send you a 1099 even if you make more than $600. PayPal will send you a 1099 if the following is met: "PayPal is required to report gross payments received for sellers who receive over $20,000 in gross payment volume AND over 200 separate payments in a calendar year." [www.paypal.com]

I do not understand where this information is coming from, it's grossly inaccurate . .

Shopping Southeast Pennsylvania, Delaware above the canal, and southwestern NJ since 2008
I posted a reply to this but it went into never never land apparently.

Myst is absolutely 100% correct. The code applies only to electronic payment processors such as PayPal, and it requires them to send a 1099-K if you receive more than $20,000 AND 200 payments. This does not mean that companies CAN'T send you a standard 1099 on the same funds, but they don't have to. Many still do because they just don't understand the tax code pertaining to electronic payments.

My previous business received $100k+ per year via PayPal. Trust me, when the tax code changed in 2010 to include this I did my research.

Edited to correct the year, as I couldn't remember.

There are reasons that a body stays in motion
At the moment only demons come to mind


Edited 1 time(s). Last edit at 06/15/2016 02:09AM by bgriffin.
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