@mystery2me wrote:
1) I count only the fee as income. Others count the fee and reimbursement as income, and then deduct the cost of the purchase as an expense. It works out the same, and both are valid methods.
2) I do not consider reimbursement-only shops as a business activity, because I do not intend to make a profit on those shops. I claim no income or expenses, and do not take them into consideration when filing taxes. Others claim the reimbursement as income, and then deduct the cost as an expense, so it washes out.
3) When I go over the reimbursed amount, I usually claim the extra amount as an expense. If I do a conveneince store with a $1 reimbursement and spend $2 on a bag of chips, I count the extra $1 as an unreimbursed expense. Sure, I could have bought a pack of gum for 25 cents, but in my professional experience I know this can give me away as a mystery shopper, so I feel a more typical purchase was justified. On the other hand, if I do a shop with a $5 reimbursement, and there are plenty of items under $5, but I buy a $20 item I really want, I do not count the extra $15 as an expense.
4) Reimbursement-only shops that go over. In your example, you spend $42 with a $35 reimbursement. I would just count this as break even and not report income or expense on the shop. If I used the other method, I would record $35 in income and $35 in expenses. I would not deduct the extra $7 as an expense, because I cannot legally claim a loss on an activity where I did not intend to make a profit. Sure, there are rare exceptions where maybe you are "getting your foot in the door" with an MSC, or it was a combined fee and reimbursement and you did not realize how pricey the items were, but those excuses can be used only so many times.
5) The overall queston over whether reimbursements are taxable is largely a matter of opinion, and valid arguments can be made both ways. I personally do not count them as income, mainly because I pay less in taxes that way. But no one can point to a tax court ruling that directly addresses this issue, although some report passing an audit doing it that way. In fact, a few people might be better off tax-wise counting reimbursements as income, and they would probably be perfectly okay doing it as long as they could show the activity was ongoing and contributed substantially to their livelihood. Best check your situatioin with a tax professional before trying it that way, though.
@Tarantado wrote:
It's interesting the way you wrote this. I use reimbursement shops for a variety of reasons, whether I like the reimbursement of items or services I'm getting and often, I like to combine additional reimbursements to maximize my earnings such as paid parking at the airport, toll expenses, etc. The prime example was a recently trip where I was able to get the same parking expense reimbursed by three separate MSC's because I had shops in the area covered by 3 different MSC's, but all covered parking expenses for me, as a 'bonus' in a way. If you neglect to consider reimbursement only shops as part of your business activity, I'm guessing you never double dip on reimbursements, where ethical and allowed?
@Lady Marius wrote:
Hi spfeedie,
First of all reimbursements are never considered income. How you handle them is up to you. I report them as part of my Gross Income, and then subtract them as reimbursed Expenses. I do this because you will find that at a later time, if you make enough to receive 1099s, not all MSCs only include shop fees, some also include the reimbursed amounts. The other way to report is to just report the fees and not reimbursed amounts in your Gross Income. Reporting this way, you would not report them as Reimbursed Expenses either.
@mystery2me wrote:
4) Reimbursement-only shops that go over. In your example, you spend $42 with a $35 reimbursement. I would just count this as break even and not report income or expense on the shop. If I used the other method, I would record $35 in income and $35 in expenses. I would not deduct the extra $7 as an expense, because I cannot legally claim a loss on an activity where I did not intend to make a profit. Sure, there are rare exceptions where maybe you are "getting your foot in the door" with an MSC, or it was a combined fee and reimbursement and you did not realize how pricey the items were, but those excuses can be used only so many times.
@Tarantado wrote:
First, great job on filing extension and keeping yourself aware on deadlines.
Next, I'd suggest to organize your earnings first.... In other words, let's keep it simple. There are 4 different types of jobs when it comes to this business:
1. Lump sum fee with shop-related expenses. So any expenses related to the project is INCLUDED within that lump sum fee.
2. Fee and reimbursement separated. So you will be paid a fee + a reimbursement. Any amount over the reimbursement limit(s) (if any) will not be reimbursed.
3. Lump sum fee with NO shop-related expenses.
4. NO Fee and reimbursement only. Any amount over the reimbursement limit(s) (if any) will not be reimbursed.
Take the time to organize the your numbers into the above categories above.
Afterwards, think of any tax-related expenses that can be deductible:
1. The obvious on is mileage applicable to your vehicle to perform that job that is not part of your personal, typical W-2 job work route, etc. if you're obtaining this tax benefit in this manner vs. 'ACTUAL' vehicle expenses, which I understand that many shoppers utilize since it benefits them more than the flat-rate mileage unit cost.
2. Any non-reimbursed expenses necessary to perform the job like parking, tolls, hotel stays, office supplies, etc.
Lastly, it can be recommended to at least try out an accountant to at least get a better grasp on filing taxes on your work this year if you've never done it before. It's better to at least learn the ropes from someone if you're not familiar instead of taking your shot with TurboTax on your own.
@Mert wrote:
spfoodie, if you haven't yet read this post, here's a link to help you gain understanding. [www.mysteryshopforum.com].
Most tax software has a step by step mode that will assist and walk you through your return. However, it will be much easier for you if you have a basic understanding before starting your return. Since you've filed an extension, you have time. Going forward, using the same tax prep software is advantageous, in that it will save, and carry forward information from the previous year, automatically populating fields into the current year.
@iShop123 wrote:
As far as reimbursement, the IRS tax guy told me that if there is something available within the reimbursement, but I choose to get something else, the overage is NOT tax-deductible. That sort of screws me with some of the companies that don't really cover the whole cost of dinner for me and a guest. Think about it -- if I do a shop at a grocery that reimburses $14 and I spend $100, would you really think that would be deductible? If so, I'll do all my normal shopping on a mystery shop!
One of the big problems is that IRS agents are not held liable for what they tell you. So you can sit on hold for four hours to get someone on the phone, and you still won't get an answer that you can use. I'd like to see reform in the whole system (maybe a [fairtax.org]?).
@iShop123 wrote:
@sp, what I meant was this - MSC allows a reimbursement of $125 for a meal for two. I can do that by ordering pasta or chicken, but my companion wants steak and I'm eager to please.. The bill comes out to $150. I claim $125 as reimbursement; the other $25 is out of pocket. At least, that was my understanding of his instructions.
(It's also why I've become pickier at choosing restaurant assignments.)
@BarefootBliss wrote:
What do you do when you perform a shop, you bear the purchase expense, then the shop is rejected and you are not paid. Can you deduct the amount of your expense even if the shop was not approved?