tax question - please help

So I decided this year, I will use mileage spend for MS'ing for tax purpose. I calculated I drove 1000 miles for mystery shopping . Turbo tax used standard deduction (which is 55 cents per mile approx) and my tax reduced by $550. Am i doing anything wrong OR this is right ?

P.S -> If i go for a shop which is 10 miles , I am counting it as 20 miles because total travel up/down is 20 miles . I hope that is correct.

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If you go to directly to a shop which is 10 miles away, and then go directly home, you indeed entitled to claim 20 miles. If you go from Shop A to Shop B and that trip is 5 miles, and then from Shop B directly home for 12 miles, then you claim 10 + 5 + 12 = 27 miles.

I assume that you decided that the standard deduction for mileage is best (TurboTax would have prompted you with help to figure that out). In which case the calculation of 1000 x $0.55 = $550 is correct. TurboTax will enter it onto Schedule C for you. If you paid for tolls or parking, that can be claimed in addition.

Don't forget other business deductions such as paper, pens, copies, printer ink, and possibly a home office deduction if you used a room exclusively for business.

Shopping Southeast Pennsylvania, Delaware above the canal, and South Jersey since 2008

@myst4au
Just curious as I am doing this for the first time. I can do shop 10 miles away for $3. But overall what I get is 20 miles X .55 cents + $3 = $14 ? I understand that there are car and insurance expenses but still I see $14 as a great benefit.. Am i missing something ?

@komalagarwal695 wrote:

@myst4au
Just curious as I am doing this for the first time. I can do shop 10 miles away for $3. But overall what I get is 20 miles X .55 cents + $3 = $14 ? I understand that there are car and insurance expenses but still I see $14 as a great benefit.. Am i missing something ?

Well, technically, you get $3, which you have to pay taxes on, and then can deduct $11 from the taxable amount due. There is a difference, but you have to pay for gas, car depreciation, etc too.

Edited for accuracy. You get $11 subtracted from your taxable income, which is not the same as $11 in your pocket.

Edited 1 time(s). Last edit at 03/04/2019 09:58PM by quovatis.

Whoa! The $11 deduction for mileage is a deduction from income (revenue). It is not a deduction from the amount f taxes that you owe. If you really received only $3 as a shop fee, then you lost money doing this shop. $3 - $11 = - $8 and that would cause a problem if you lost money on all your shops. You have to show an intent to make a profit otherwise this is a hobby, not a business. Generally, the rule of thumb is 3 out of 5 years on a rolling basis should be profitable.

Suppose you did 10 shops in one day at a fee of $10 each = $100 revenue. And to do that route of 10 shops, you drove 30 miles: 30 x $0.55 = $33. If this was entire income and expenses for mystery shopping for the year, then Turbo Tax (or any other program or doing it by hand) would have you enter revenue of $100 on Schedule C, and expenses (for mileage) of $33 on Schedule C. You would then owe income and social security tax on $66 (your net revenue). If you are in the 15% tax bracket, and adding in Social Security self-employment rate of 12.4%, then you would owe 15% + 12.4% = 27.4% of $66 = $18.04

Does that help?

@quovatis wrote:

@komalagarwal695 wrote:

@myst4au
Just curious as I am doing this for the first time. I can do shop 10 miles away for $3. But overall what I get is 20 miles X .55 cents + $3 = $14 ? I understand that there are car and insurance expenses but still I see $14 as a great benefit.. Am i missing something ?

Well, technically, you get $3, which you have to pay taxes on, and then can deduct $11 from the tax due on your earnings. There is a difference, but you have to pay for gas, car depreciation, etc too.

Shopping Southeast Pennsylvania, Delaware above the canal, and South Jersey since 2008

imyst is correct! The mileage is deducted from your net MS income NOT from your taxes!!! So if your net MS income was $1200 and you traveled 1000 miles, you will deduct $550 from $1200 and then pay taxes on the remaining $650. All of this happens on Schedule C. If you use Turbo Tax, it will walk you through the necessary worksheet to fill out Schedule C.

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tax question - please help

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