I know that the cut off is $600 before being required to report, but is it $600 in fees or combined fees and reimbursements? And is it $600 per company or $600 total for overall mystery shopping? Thanks!

The $600 has nothing to do with your taxpayer obligation to report the income to the IRS. It is simply the threshold at which a given payer (MSC in this case) must supply you with a 1099. You report all of you fee income to the IRS on Schedule C and also use that to deduct business expenses. Reimbursements are not income.

Wales is right. If Company A pays you $450.00 in fees and $285.00 in reimbursements, you probably won't get a 1099...HOWEVER, you DO still have to report the $450.00 as income. This applies for all the companies you shop with, so it's best if you keep track of your income on a spreadsheet or something similar. For those companies that you shop for and earn over $600.00 in fees, they should send you a 1099. However, there has been some discussion on the forum about companies who pay via Paypal, and even though the fees total over $600.00, may elect NOT to send a 1099. So again, you are responsible for reporting your income, and for keeping track of how much you earn. It's all reportable. (but not the reimbursements).

@guysmom wrote:

Wales is right. If Company A pays you $450.00 in fees and $285.00 in reimbursements, you probably won't get a 1099...HOWEVER, you DO still have to report the $450.00 as income. This applies for all the companies you shop with, so it's best if you keep track of your income on a spreadsheet or something similar. For those companies that you shop for and earn over $600.00 in fees, they should send you a 1099. However, there has been some discussion on the forum about companies who pay via Paypal, and even though the fees total over $600.00, may elect NOT to send a 1099. So again, you are responsible for reporting your income, and for keeping track of how much you earn. It's all reportable. (but not the reimbursements).

I believe this is the most misunderstood concept for a Schedule C. You are as a taxpayer required to report all income as it is earned. This would create a huge nightmare for the government so instead of reporting our 1099 income every week, biweekly or monthly,; we are allowed to claim it at the end of the year. The IRS gives us a break of not paying quarterly taxes if our previous year's tax return did not require it and you know you won't push it for the current year.

I will repeat myself and say it out loud again. Set up spreadsheets! I have a workbook that contains all of the companies I work for and the solid spreadsheet that has all of my other spreadsheets information. My main spreadsheet has the date, company, fees, bonuses and reimbursements. It also has the information for my meals, mileage and any non reimbursed expenses related to this business.

I would love to be able to set up a spreadsheet to help people but mine is a work in progress. I won't know if it's really right until the accountant sees it.

I wish I could help more but none of us work the same way and so it probably could be more of a detriment than a help.

MaryAnn

Think of it this way. There are 200 mystery shopping companies on the list here. Say you only worked for 100 during the course of a year and stopped when your income reached $599 with each. Do you really think you could earn $59,900 for the year and not be expected to at least file a tax return?

@LisaSTL wrote:

Think of it this way. There are 200 mystery shopping companies on the list here. Say you only worked for 100 during the course of a year and stopped when your income reached $599 with each. Do you really think you could earn $59,900 for the year and not be expected to at least file a tax return?

Wow! that is a great way to explain it.


I forgot to mention in my previous post. All corporations are required to report the cash paid out to everyone. Just because a MSC isn't legally required to send you a 1099, doesn't mean they don't have to send your earnings to the government. Companies have to figure out how to make their schedules work for them. Trust me; your earnings are included for their expenses. And if they get audited, your name may come up. That's a different kettle of worms, plus a horse of a different color if you haven't kept fairly accurate records as a mystery shopper.


Believe me when I say this: the IRS comes after the little folk first. We don't have the cash to fight the accusations.

@Bubbabubba wrote:

Why would you include meals? as in mileage and other expenses.
That's not deductible unless it is a meal that IS conducting business such as a business meeting.
Consult with your CPA

Actually meals are deductible up to 50%. I keep track of those expenses and allow my CPA to make the final decision. Meals on the road while conducting business are deductible. The IRS has capped the amount you can claim. But yes, if I want to set myself up for an audit...I can claim my meal expenses.

Meals "on the road" when you are not just on a day away from home are not deductible unless they serve a specific business purpose, such as meeting with a client or colleague. If you are on a multi-day route, that is a different category, found under "travel."

Thanks for the info everyone. I've only ever done meal reimbursements before, but I just picked up two that actually have a fee attached so I'm glad I asked for clarification.

@Bubbabubba wrote:

Why would you include meals? as in mileage and other expenses.
That's not deductible unless it is a meal that IS conducting business such as a business meeting.
Consult with your CPA

Yes, definitely consult with your tax advisor. But meals are deductible in many circumstances, even if the meal itself does not involve conducting business. Your blanket statement is incorrect. For example, I'm an antique/vintage-fashion dealer in one of my "other lives." When I go on a buying trip, I can deduct meals--up to allowable limits, of course. I'm also a freelance marketing communications specialist. I sometimes had to go out of town for clients to do a press proof, for example, and would be gone an entire day, if I had to buy a meal, I could deduct it. If I'm on the road doing a route of mystery shops, and am gone all day, I can deduct the cost of a meal I have to eat during the course of that route. Again, that deduction is subject to IRS-allowable limits.

And, yes, this information comes straight from at least three tax professionals (two of whom were CPAs, and the other is a licensed or certified--I forget what it's called--tax preparer) who have done my taxes (all of which have included Schedule C income) over the last 30 years. I'm not making it up/pulling it out of my butt!

I see I've cross-posted with others on this topic. Deducting meals shouldn't set you up for an audit, as long as the costs are reasonable. And, obviously, if you're audited, you probably need to be able to prove you were "on business" on those days. Meal deductions aren't automatically a flag for being audited. I don't understand why people are "afraid" to take them. They're a legitimate business expense, if not abused.



Edited 1 time(s). Last edit at 06/25/2016 02:01PM by BirdyC.

And, before I get dissed regarding my comment about meals on the road when on a day route.... This topic came up here some time ago, and I asked my tax preparer the specific question: If I am gone on business for just one day and am gone all day, and eat a meal during that day, is that meal deductible? The answer was yes, up to the allowable limit.

I imagine if a person sets up a "route" and schedules one shop for the morning and one for the afternoon, and the shops are five miles from home, that any meal eaten "on the road" is NOT deductible, however!



Edited 1 time(s). Last edit at 06/25/2016 02:26PM by BirdyC.

[www.irs.gov]


"Question: For business travel, are there limits on the amounts deductible for meals?
Answer:

Meal expenses are deductible if your business trip is overnight or long enough that you need to stop for substantial sleep or rest to properly perform your duties. Meal expenses are also deductible if the meal is business-related entertainment. You can figure all your travel meal expenses using either of the following methods:
Actual cost. If you use this method, you must keep records of your actual cost.
The standard meal allowance, which is the federal meals and incidental expense (M&IE) per diem rate. The GSA website lists these rates by location. Note that lower rates apply for the first and last days of travel.
The deduction for unreimbursed business meals is generally subject to a 50% limitation."

The page than has links to the specific IRS publications.

@Flash wrote:

Meal expenses are deductible if your business trip is overnight or long enough that you need to stop for substantial sleep or rest to properly perform your duties.

This is why I don't understand why people claim that one can't deduct meals eaten on a full day of route shopping, or shopping for inventory, or conducting business for a client, or whatever the business reason is. People need a rest break and nourishment while on the road for eight, ten, or more hours. You do not have to be on an overnight in order to deduct meals....

Excerpt from my e-mail conversation with my tax guy:

Question: "I have a question about meal expenses.... if the trip takes a significant part of the day. IRS publication 334 says it has to be longer than an ordinary work day or long enough that you must rest up in order to perform the duties involved in your business...."

Answer: "You can deduct the meals but only 50%. It does not mean your travel time. If you are involved with dept of transportation then it goes to 80%."

He then clarified further than the "work day" isn't necessarily measured by number of hours; "long enough that you must rest up, etc., etc., etc." is not always considered to be during a greater-than-8-hour day. I imagine that stipulation varies greatly from field to field and person to person.

I frankly don't think IRS is considering a lunch break 'substantial sleep or rest to properly perform your duties'. I certainly would not want to get into it with IRS claiming that it was and thus I should be allowed to deduct 50% of the cost of my lunch. Similarly I would not want to insist that I pulled into a rest stop for an hour nap in the car before continuing my route to justify half of my lunch cost. If in the morning I wake up in my own bed and am home for dinner--even if it is a late dinner--I would rather pack a sandwich for lunch or have a lunch shop than try to decipher what 'substantial' might mean to an IRS agent.

As I have stated elsewhere, you are free to claim anything on your tax return you want because you sign it and are responsible for what is in it. Meals on a day trip are not something I personally would be willing to do.

One one day routes I err on the side of caution and just eat the cost, pun intended. On trips my deductible food expenses start with dinner at the end of the first day and end with breakfast the day I am returning home just to be sure no lines are crossed. Normally on a trip where all expenses are being reimbursed it will then include lunch on both the first and last days depending on the schedule and what is reasonable. In other words, if I could have my work done in order to return home by noon or one on the final day, I won't charge them for lunch because I chose to sleep in or do some sightseeing.

@Flash wrote:

I certainly would not want to get into it with IRS claiming that it was and thus I should be allowed to deduct 50% of the cost of my lunch.

^^this^^

I know that I slightly overpay every year because the only deductions I take are mileage and equipment purchases. I consider it "banking" and "insurance." Should I get audited, they will owe ME money, not the other way around.

You have to claim every bit of income you make. That includes prize winnings, gambling winnings, the $50 you got for opening a bank account, and even the $10 in Swagbucks you made. The IRS is a vile cancer on us surpassed only by TSA Gropers.

Mod note: website links removed as per Forum policy

Obviously, everyone should claim whatever they feel comfortable with. I just don't understand the reluctance of people to claim legitimate allowable meal expenses (or any other expenses, for that matter!).

Personally, based on my 30+ years of self employment and on the advice and recommendations of every tax professional with whom I've ever dealt (reinforced through seminars I've attended given by tax pros to self-employed individuals), I feel totally comfortable deducting meal expenses taken on day trips for business purposes. Depending, of course, on the length/miles/hours, etc., of the trip. I think these are allowable, without ambiguity. People have to eat; it's not frivolous to stop for lunch on a business trip that legitimately spans several hours. You don't have to pack a cooler with food to eat on the road.

I've never been audited, but if I were to be, I'd have no worries whatsoever about what I've claimed in meal expenses. It's important to claim all income, but it's important to claim all allowable expenses, too! At least that's what I've always been told.



Edited 1 time(s). Last edit at 06/25/2016 09:23PM by BirdyC.

@LisaSTL wrote:

....what is reasonable. In other words, if I could have my work done in order to return home by noon or one on the final day, I won't charge them for lunch because I chose to sleep in or do some sightseeing.

"Reasonable" is one of the things the IRS looks at in determining if something is deductible.

And, what you said is the same point I made earlier--you can't plan a route purposely to cross a lunch period if you could have easily done it in the morning or in the afternoon. That's something I'd guess the IRS wouldn't consider "reasonable."

But if you're gone for 8 or 10 hours on a route, or going to or from a client meeting in another city, or showing clients houses from 10 a.m. until 5 p.m., you have to eat. I can't see that the IRS would expect you to pack a brown bag or not eat for that long. Honestly, it's unreasonable to say that they would. Of course, if you're showing houses all day to one client and take him/her/them to lunch, that's deductible as a direct business expense. But say you're out of town in the morning showing homes to one client, and you have another four showings scheduled in the afternoon with other clients in town--with no time in between to travel from the out-of-town location back to town, go home or to your office and eat, then go back out to your other showings. If I stopped to eat, I'd take the expense as a deduction. Without thinking I was trying to cheat the IRS.



Edited 1 time(s). Last edit at 06/25/2016 09:00PM by BirdyC.

In my case it's not thousands of dollars left on the table. I have no problem with taking my deductions and actually no problem with the idea of paying taxes. Roads, the police, the military, public parks, etc., don't just appear by magic.

I've got a question. for mystery shopping, say I have $1,500 in mileage expenes and my net income from MS is $1,000. I am netting a loss of $500. On my merchandising side of work, I make $1,000. Would my mileage expense from MS dip into my merchandising income?

Of course. You would transfer a net loss of $500 from one Schedule C to form 1040 and a profit of $1000 from the other Schedule c to your 1040 and just do the math.

However, you may want to put them both on one Schedule C so that you show a net profit after everything has been computed there, to transfer to form 1040. I would favor the latter approach, since it greatly simplifies your records and your tax forms. Just state the nature of the business as something like "consulting" on the single Schedule C.

@walesmaven wrote:

Of course. You would transfer a net loss of $500 from one Schedule C to form 1040 and a profit of $1000 from the other Schedule c to your 1040 and just do the math.

However, you may want to put them both on one Schedule C so that you show a net profit after everything has been computed there, to transfer to form 1040. I would favor the latter approach, since it greatly simplifies your records and your tax forms. Just state the nature of the business as something like "consulting" on the single Schedule C.

What business(code) would be appropriate to put down?

@DavePi wrote:

What business(code) would be appropriate to put down?

I believe there is a generic code like 99999, to use for any profession not included in the list given by the IRS. If I am incorrect, someone please correct me.

@walesmaven wrote:

Of course. You would transfer a net loss of $500 from one Schedule C to form 1040 and a profit of $1000 from the other Schedule c to your 1040 and just do the math.

However, you may want to put them both on one Schedule C so that you show a net profit after everything has been computed there, to transfer to form 1040. I would favor the latter approach, since it greatly simplifies your records and your tax forms. Just state the nature of the business as something like "consulting" on the single Schedule C.

I looked on a website and it states,

"The IRS expressly states you cannot combine two activities for the purpose of hiding a loss from one of the activities."

"If you have unrelated activities, however, you must report them on separate Schedule Cs."

These statement conflict with your post so I'm not sure if your giving valid information. Merchandising and mysteryshopping are 2 different activities, so I'm just going to put them on different schedule Cs.

"Schedule C and SE Filing Requirements

Sole proprietorships can generally report all of their business income and expenses on a single Schedule C (even if they use more than one trade name) provided that their business activities fall under the same Business Activity Code as reported on Line A of Schedule C. However, if a sole proprietorship operates multiple businesses that will fall under different Activity Codes as reported on Schedule C, then the owner should report the income and expenses for each business on a separate Schedule C."

Got this from a different website which parallels the information from the other website.

Is merchandising all that different from mystery shopping/auditing for tax purposes?

My statement was based on the idea that the two are more related to one another than to anything else. We may differ with one another on that, but if I am correct, it was a valid statement.

DavidPi makes a good point for general reference. But if I did both mystery shopping and merchandising, I would probably treat them as a single business, mainly because I'm sure I would combine both types of jobs on a single trip, and it would be difficult to separate expenses and overhead.