MS income for taxes ?

Do you show your MS income as hobby income, self employment income(Schedule C ?) OR just as a regular income (add it to your regular income). This is my first year of filing returns as a shopper.

Basically tax professionals are human being's just like us (many are good and many are okay) so I am trying to gather as much info as possible and common approaches/practices by other shoppers before approaching them.

I understand that I should consult a tax professional and I also understand everybody is different and what you do might not not be the same for me. But in general I wanted to know what do other shoppers do .

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More About Mystery Shopping Taxes

Back in the day, as in when this was a small side gig for me, I didn't know any better. The income was added as if it was a part time job. The good news was it amounted to only a $300 to $600 each of those three years so it seems there was not a significant impact. After returning to MS and having it become a primary income source I began to file using Schedule C to take business deductions.

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Schedule C is the way to go if you expect to deduct automobile costs, office supplies, etc.

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.

I turn in all of my 1099's to my CPA. I did own a business for many years, I put in gas deductions, any money I have spent on Mystery Shopping, office supplies, etc. I have a home office. To be honest I have no idea what he does with what I turn in. I have had a CPA for 35 years. Probably not to helpful.

Edited 1 time(s). Last edit at 01/19/2018 04:33PM by shopper8.

Unless the income is miniscule, I would use the Skd. C. Getting the IRS to change hobby income to a business income is a royal pain. Keep track of all your expenses, especially mileage.

I always take a profit, whether I made one or not. I do not under any circumstances want MS to be classified as a hobby. I didn't make squat last year because of family issues. Years past I've made 10-12 k working part-time. My mileage deduction is a beautiful thing.

I do not ever take off home office, because I don't have a designated office area.

Set up spreadsheets and keep track of everything.

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!

Hi,
I have a question. I was planning on doing a schedule C. I did mystery shopping occasionally in addition to my full time job.Most of the shops I do are strictly reimbursement. If i take the mileage deduction, I come out with a net loss. However, if I don't do the mileage deduction I come out with a net income of about $100. Is it bad to not take the mileage deduction this year in order to avoid having a loss?
Thanks!

It sounds like a good plan to skip the mileage deduction this tear. You will not have any SE tav and the small net income will not affect your final tax bill by much. Or, you could take just enough mileage to wipe out 90% of you Schedule C income.

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.

Tax pro here, but it will definitely depend on your numbers, so its best to ask someone who can familiarize themselves with your entire tax situation.

With self employment income, you are required to deduct all expenses. This could put you at a loss, which is okay as long as you don't continuously report losses every year. The IRS wants to know your intention. If you are intending to do this to make a profit, it is a business. If its just something fun to do, a way to get stuff for free, it is probably a hobby. If its a hobby, you don't get to deduct any of your expenses unless you itemize (file Schedule A).

The good news about a loss is that it will generally reduce your overall income, so its not a bad thing for you, and deducting your mileage is completely reasonable and very easy to prove to the IRS in the event of an audit.

Reimbursements shops are a really gray area, and you are unlikely to get consistent answers here. I personally don't claim mileage on shops for reimbursement only, because I don't make any income to deduct from.

Britjo,
I think the new tax legislation got rid of itemizing employee expenses on Schedule A when they raised the standard deduction. Anyway, 1099 earnings would not be "employee" earning, so I wonder about taking "employee" expenses.

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.

@mystery2me wrote:

Reimbursements shops are a really gray area, and you are unlikely to get consistent answers here. I personally don't claim mileage on shops for reimbursement only, because I don't make any income to deduct from.

I keep track of my mileage, whether it's a reimbursement only or a shop on my route.

As a former tax professional; I will shout this out loud. KEEP TRACK OF EVERYTHING! Try to do it an organized way so you aren't charged extra, i.e. spreadsheets. Showing up with all your receipts in a shoe box; will probably cost you more money.

NO, I do not want to see your gas receipts. I do want to see your mileage. I want to see how much you paid for office supplies. I want to see if you needed to buy equipment to support MS. I will not recommend taking off a home office, because that it a kicker to get audited.

I'll always recommend paying the extra for a Skd-C EZ over taking $100 as hobby income. Once it's a hobby, you can't take anything off.

It might hurt but you're best trying to show a profit.

People will probably disagree with me. I'm recommending what I consider the safest way and keep MS as a business, even if you're not making any money right now. It's better to bite the tax bullet now, than worry about it, when it might be your major source of income. Then again, I could be wrong and usually am.

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!

My CPA told me that in addition to the milleage office supplies l I am able to take my phone, and internet charges since I use both of them a great deal for shopping. I really use it more than ' he reports. t

@Insight wrote:

My CPA told me that in addition to the milleage office supplies l I am able to take my phone, and internet charges since I use both of them a great deal for shopping. I really use it more than ' he reports. t

If you can support it, go for it!

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!

Mystery shopping wouldn’t be employee expenses, it would be deductible on schedule A as hobby expenses, if you report your income on form 1040, line 21 as hobby income.

Since there are so many different factors involved, there really is no “best” way to do it, it isn’t one-size-fits-all.

Or Schedule C as business expenses.

@Britjo wrote:

Mystery shopping wouldn’t be employee expenses, it would be deductible on schedule A as hobby expenses, if you report your income on form 1040, line 21 as hobby income.

Since there are so many different factors involved, there really is no “best” way to do it, it isn’t one-size-fits-all.

I think an overwhelming majority of shoppers file MS Income as a business and not as a hobby.

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