Taxes

I have a question about reporting income to the IRS. There is a difference in shop fee and reimbursement. However, sometimes shops just post a fee. What If the shop posts a fee of $60 but requires you to spend $60 on food in a restaurant. Can you deduct the $60 spent from the fee and consider it reimbursement? I went to the IRS web site but can't find this particular question. Thanks in advance.

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You report the $600 fee as income AND report the $60 expenditure as a cost of doing business. IF the guidelines state that the $60 is reimbursement, instead of stating it as a fee, you technically do not report either; BUT if you feel better, report one as income and the other as expense. However you do it, it is a "wash" as far as affecting your taxable net income on schedule C.

If you are new, it is important to remember that MS income and expenses get reported on Schedule C, with the bottom line from that form then transferred to Form 1040 as Self-employment net income or loss.

If you use Turbo Tax, the instructions will walk you through filling out Schedule C.

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.

Thank you! Which line on form C does required spending go on? Also, this is a hobby for me. I do not do it on a regular basis. Is there a difference in filing if it is an occassional thing done for a hobby?

If you intend deducting expenses, then you are running a business, not a hobby. Whether you have $10 of revenue a year or $100,000 of revenue a year as a mystery shopper, you still complete Schedule C as a business. If you insist that you are doing this as a hobby (why you would choose that is beyond me), then every penny you receive is taxable income. Perhaps, and I emphasize perhaps, if you receive funds specifically labeled as a reimbursement, you could avoid paying taxes on that. But then you still have to report income on Schedule C, so why not also report expenses on Schedule C? And remember, expenses include mileage, which this year is $0.58 per mile if you use the IRS mileage deduction.

@Susanwakeley wrote:

Thank you! Which line on form C does required spending go on? Also, this is a hobby for me. I do not do it on a regular basis. Is there a difference in filing if it is an occassional thing done for a hobby?

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

Susan,
myst4au is correct. If you want to deduct expenses, it is a business and MUST be reported on Schedule C. Different expenses are reported on different lines of Schedule C. For instance, vehicle expenses, supplies, insurance, postage, parking, 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.

So if I am paid a fee of $60 and required to spend $60, which line on schedule c do I record what I had to spend to do the shop. None of the choices on the form seem right.

There is space to "write in" other kinds of expenses. I have a category I call "reimbursed expenses" and I add in under the expense section on one of the blank lines. I also have a classification called "unreimbursed expenses."

Edited 1 time(s). Last edit at 07/07/2019 05:09AM by Equine24.

@Susanwakeley wrote:

So if I am paid a fee of $60 and required to spend $60, which line on schedule c do I record what I had to spend to do the shop. None of the choices on the form seem right.

I'm going to go ahead an state the obvious here - this is a forum for mystery shopping, not a forum for tax advice/experts. You should visit a CPA or tax preparer to answer these kinds of questions if you can't figure it out by reading the IRS website.

@myst4au
So do you think its worth it to get a business license and start treating it as a business rather than a hobby? Still trying to figure out all the logistics.

You don't need to get a business license to file it as a business on a Schedule C.

I would NOT get a business license. That just complicates things, IMO.

@ThatGuyKevin wrote:

@myst4au
So do you think its worth it to get a business license and start treating it as a business rather than a hobby? Still trying to figure out all the logistics.

I truly doubt that you need a business license. You are a contractor - and not the kind that builds buildings. There is a range of opinions around whether you should get an EIN. If you do, it costs nothing (zero dollars) if you do it yourself on the IRS website. I have an EIN, and a few MSCs require it. Some who post here are against EIN numbers and are presumably excluded from the small number of MSCs which require them. Using an EIN does not change how you report income and expenses on Schedule C.

@ThatGuyKevin wrote:

@myst4au
So do you think its worth it to get a business license and start treating it as a business rather than a hobby? Still trying to figure out all the logistics.

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

I don't have an EIN. There were a few MSCs that stated shoppers must get one. I didn't. They still let me do shops.

@JASFLALMT wrote:

I don't have an EIN. There were a few MSCs that stated shoppers must get one. I didn't. They still let me do shops.

Last year was the first year ever that I earned over $600 with Trendsource.....they wouldn't release any pay for earnings over $600 until I submitted an EIN to them, so I had to. But up until last year, I had shopped over a dozen years with them, earning under $600, and never got an EIN. Now I have one with them, and watch, I'll probably never earn over $600 with them again!!

Good to know. They don't have enough shops in my area that I like to do for me to over come close to $600. I will do the occasional bonused shop but in general their fees are cheap cheap cheap, and I don't like to do the onsite inspections, so...

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