Do you deduct for mileage if reimbursement only?
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@Tarantado wrote:
@Niner wrote:
@Tarantado wrote:
Yes. My bottom line is positive when I file my taxes. Sooooooooo.... yeah.
I don't do this to make money, I do it more to get reimbursed for things I don't want to spend money on. If this is a true and needed source of income, your goal should be to have a positive number. Good for you, Tarantado. So, high five (?)
I should put more context to this... if you’re filing your taxes accounting for your revenue stream, AND if the TOTAL mileage will still keep you positive including any shops that reimbursement only, then there’s your answer: account for the mileage.
I agree with this. As long as your method is within IRS guidelines and is logged consistently, you should not run into any issues. You will need to track both personal and business miles to differentiate if you use one vehicle.
It is in every business' (large or small) best interest to decrease their tax liability as much as possible. This is why the tax system is so complicated - it gives those with the know how to maximize deductions and get government incentives.
I ended up putting in around a $900 profit.
I think it all depends if you treat this like a job or a hobby. I treat this as a job, I keep track of everything for the IRS and I claim mileage and take all of the deductions for mileage. I turn in every penny I make, because I deduct the miles I drive there, I have always ended the year in the green, although this year I think is going to be tight.
If you are taking only reimbursement-only jobs and working primarily to get free meals, rooms, gas, or whatever, those reimbursements constitute "barter income" and are 100% taxable. Based on what you have written, you will be in trouble if ever audited and will owe back taxes on all those "reimbursements". For a reimbursement to be a legitimate business expense and therefore not taxable, it has to have been incurred while earning some income.
@migrants wrote:
If you are taking only reimbursement-only jobs and working primarily to get free meals, rooms, gas, or whatever, those reimbursements constitute "barter income" and are 100% taxable. Based on what you have written, you will be in trouble if ever audited and will owe back taxes on all those "reimbursements". For a reimbursement to be a legitimate business expense and therefore not taxable, it has to have been incurred while earning some income.
What are you talking about?
Revenue (reimbursement payment from MSC) MINUS Expenses (shop-required Expenses) = $0 for “reimbursement only shops.” Meaning, $0 taxable income.
Shopping the Greater Denver Area, Colorado Springs and in-between in Colorado. 33 year old male and willing to travel!
@Tarantado wrote:
@migrants wrote:
If you are taking only reimbursement-only jobs and working primarily to get free meals, rooms, gas, or whatever, those reimbursements constitute "barter income" and are 100% taxable. Based on what you have written, you will be in trouble if ever audited and will owe back taxes on all those "reimbursements". For a reimbursement to be a legitimate business expense and therefore not taxable, it has to have been incurred while earning some income.
What are you talking about?
Revenue (reimbursement payment from MSC) MINUS Expenses (shop-required Expenses) = $0 for “reimbursement only shops.” Meaning, $0 taxable income.
I hope you are right and that thr other view is incorrect!
Sorry, but you can only deduct an expense if that expense was incurred necessarily while earning (or attempting to earn) income. No potential for income = no deductibility of the expense.
This is pretty basic stuff. If you are working to earn a meal, the full fair value of the meal is taxable. However, you can deduct your mileage to get to the restaurant.
Once again, the value of the free meals you have been getting is known as "barter income", because you are working without the expectation of any monetary remuneration, and it is most definitely taxable. Look it up on the IRS site, and please see a credible tax professional before you get in trouble.
This is pretty basic stuff. If you are working to earn a meal, the full fair value of the meal is taxable. However, you can deduct your mileage to get to the restaurant.
Once again, the value of the free meals you have been getting is known as "barter income", because you are working without the expectation of any monetary remuneration, and it is most definitely taxable. Look it up on the IRS site, and please see a credible tax professional before you get in trouble.
@migrants wrote:
Sorry, but you can only deduct an expense if that expense was incurred necessarily while earning (or attempting to earn) income. No potential for income = no deductibility of the expense.
This is pretty basic stuff. If you are working to earn a meal, the full fair value of the meal is taxable. However, you can deduct your mileage to get to the restaurant.
Once again, the value of the free meals you have been getting is known as "barter income", because you are working without the expectation of any monetary remuneration, and it is most definitely taxable. Look it up on the IRS site, and please see a credible tax professional before you get in trouble.
Yes, I have a CPA take care of my stuff.
Anyways, here's a dive into the topic that's been asked about multiple times: [www.mysteryshopforum.com]
Shopping the Greater Denver Area, Colorado Springs and in-between in Colorado. 33 year old male and willing to travel!
You perform a service solely in return for a meal. That is a barter; the reimbursement for the meal is fully taxable and must be reported on Schedule C. See IRS Publication 525 (and find a sharper tax advisor).
This notion that one can devote oneself to earning tens of thousands of dollars worth of "free" meals with absolutely no tax implications is just magical thinking -- crazy stuff that defies common sense as well as clear IRS directives. Once again, for a reimbursement to be deductible from your revenue, the expense must have been incurred as a necessity while earning income other than the reimbursement itself. If the reimbursement is the raison d'etre for your work, it is not deductible because there is nothing else to deduct it from.
No, a few mystery shoppers are not so smart that they have proved wrong the old adage that there's no free lunch; rather, they are just blissfully misinformed and lucky they haven't yet been audited.
Anyway, it seems that you are strongly invested in this thinking, and you will write back to refute me again and have the final word. Good luck to you. I understand that the IRS audit rate is now under 1%, so you'll probably never get pinched.
This notion that one can devote oneself to earning tens of thousands of dollars worth of "free" meals with absolutely no tax implications is just magical thinking -- crazy stuff that defies common sense as well as clear IRS directives. Once again, for a reimbursement to be deductible from your revenue, the expense must have been incurred as a necessity while earning income other than the reimbursement itself. If the reimbursement is the raison d'etre for your work, it is not deductible because there is nothing else to deduct it from.
No, a few mystery shoppers are not so smart that they have proved wrong the old adage that there's no free lunch; rather, they are just blissfully misinformed and lucky they haven't yet been audited.
Anyway, it seems that you are strongly invested in this thinking, and you will write back to refute me again and have the final word. Good luck to you. I understand that the IRS audit rate is now under 1%, so you'll probably never get pinched.
Without wading too far into this, my own personal research has turned up nothing from the IRS etc. that specifically says it is okay to claim expense deductions for work done for reimburement only. i.e. work done without anticipation of making a profit. If you claim mileage for reimbursement-only jobs and are one of the unlucky few audited, no one on this forum can point to an official source saying you will pass (or fail) the audit. Just because most people do something one way, it does not mean they are right. Also consider that everyone's tax situation is different. If I am traveling on a route, it is perfectly legitimate for me to claim mileage to and from the restaurant, even when it is not a shop. And if I am audited, a few reimbursement shops here and there are likely to be overlooked, as opposed to a shopper where that is the bulk of their work. Also, some pople are better off taxwise with fewer deductions and more earned income. In short, public internet forums are good for getting ideas and opinions, but are not the final word.
I also did read that barter income is reported on a 1099-B. But all independent contractor work is reported via a 1099-MISC.
If we take the barter situation, then there are still very few reimbursement only shops that most of us do. Most high end shops do come with a small fee. The only MSC that really pushes reimbursement ONLY that I know of is ACL.
With that in mind, mileage deductions, in my opinion, should be associated with the business transfer - holistically - not “shop per shop.” There will be some instances where you do come out ahead, but if you’re doing a low fee shop far away, you will come under and it’s all a balancing act of what’s worth it for you.
If you’re getting free gas doing a gas station shop far away (with a small fee), and you take a mileage deduction, you will probably report a loss, but because you got free gas and are driving an old car, the math might actually bring you ahead.
To each their own
If we take the barter situation, then there are still very few reimbursement only shops that most of us do. Most high end shops do come with a small fee. The only MSC that really pushes reimbursement ONLY that I know of is ACL.
With that in mind, mileage deductions, in my opinion, should be associated with the business transfer - holistically - not “shop per shop.” There will be some instances where you do come out ahead, but if you’re doing a low fee shop far away, you will come under and it’s all a balancing act of what’s worth it for you.
If you’re getting free gas doing a gas station shop far away (with a small fee), and you take a mileage deduction, you will probably report a loss, but because you got free gas and are driving an old car, the math might actually bring you ahead.
To each their own
Deductions are deductions, regardless of the type of compensation received or even IF compensation is received. If you're traveling for a business purpose, the miles are deductible. Many, many business trips do not directly generate income. They are still deductible. If this were not true, Las Vegas would not exist. At least not in it's current form anyway.
That being said, as other posters point out, you are accountable to at least occasionally make a net profit for the year to avoid the IRS reclassifying your business as a hobby. I think the rule is something like three out of the past five years you have to be in the black. This isn't that high of a bar really. As long as you're up by a dollar for the year most years, you're probably fine.
Edited 1 time(s). Last edit at 07/16/2020 09:28PM by JustForFun.
That being said, as other posters point out, you are accountable to at least occasionally make a net profit for the year to avoid the IRS reclassifying your business as a hobby. I think the rule is something like three out of the past five years you have to be in the black. This isn't that high of a bar really. As long as you're up by a dollar for the year most years, you're probably fine.
@Niner wrote:
Does anyone know the answer to this? Do you deduct for mileage if the shop is reimbursement only, like a Texas Roadhouse with no fee, but $35 reimbursement? Thanks!
Edited 1 time(s). Last edit at 07/16/2020 09:28PM by JustForFun.
Profit is anticipated, in the form of a meal. I would 100% agree that the full value of the meal is part of gross barter income. Money is not the only currency. Barter income is taxable.
But we pay taxes on NET income, not gross income.
In practice, it is also an equivalent deduction since it is a requirement to get the work. Whether that's deductible at the 50% rate as a work meal or at the 100% rate as an entertainment / required expense may be debatable since the work literally cannot be completed without purchasing the meal. But even so, the mileage will likely easily offset the other half.
The full value gets reported, but taxes paid against it are minimal or nothing. It may even generate a deduction that can offset other income.
That being said, the idea that a person could do exclusively reimbursement only jobs and not ever incur a tax burden seems impractical. It's not a business if it never nets anything. It might be fun for a year or two but at the three year mark it needs to be in the black or it is a hobby.
But we pay taxes on NET income, not gross income.
In practice, it is also an equivalent deduction since it is a requirement to get the work. Whether that's deductible at the 50% rate as a work meal or at the 100% rate as an entertainment / required expense may be debatable since the work literally cannot be completed without purchasing the meal. But even so, the mileage will likely easily offset the other half.
The full value gets reported, but taxes paid against it are minimal or nothing. It may even generate a deduction that can offset other income.
That being said, the idea that a person could do exclusively reimbursement only jobs and not ever incur a tax burden seems impractical. It's not a business if it never nets anything. It might be fun for a year or two but at the three year mark it needs to be in the black or it is a hobby.
@mystery2me wrote:
Without wading too far into this, my own personal research has turned up nothing from the IRS etc. that specifically says it is okay to claim expense deductions for work done for reimburement only. i.e. work done without anticipation of making a profit. .
@macrophage wrote:
I also did read that barter income is reported on a 1099-B. But all independent contractor work is reported via a 1099-MISC.
Many may not recognize that these are a barter transaction and consequently do not use the barter form. The requirement to report the income is not dependent on whether the other party sends the right form, however.
@macrophage wrote:
With that in mind, mileage deductions, in my opinion, should be associated with the business transfer - holistically - not “shop per shop.” There will be some instances where you do come out ahead, but if you’re doing a low fee shop far away, you will come under and it’s all a balancing act of what’s worth it for you.
Absolutely agree. Businesses have good moments and bad. They make profitable deals, and they make unprofitable deals. Unexpected costs come, like pandemic signage or board-up costs. Unexpected opportunities come, too. What's reported is the end of period results not the hourly or daily results. As long as the year end number are positive in three out of the last five years, it's probably fine. If this were not true, no office would have company paid toilet paper since it can't be tagged to a specific profitable "job".
If you treat this as a hobby, is there any reason to be filling out the irs forms at all?
@piebaby wrote:
I think it all depends if you treat this like a job or a hobby. I treat this as a job, I keep track of everything for the IRS and I claim mileage and take all of the deductions for mileage. I turn in every penny I make, because I deduct the miles I drive there, I have always ended the year in the green, although this year I think is going to be tight.
Yes. For us, anyway. I am not a high earner in this industry as compared to others who really work it and earn substantial revenue. In my mind, I am a casual worker here; the IRS determines who is Hobbyist. However, this year I paid a significant amount of taxes for last year. I think it means I should raise my rates to astronomical, halve my work load, or retire.....
Edited 1 time(s). Last edit at 07/17/2020 01:25AM by Shop-et-al.
@sandyf wrote:
If you treat this as a hobby, is there any reason to be filling out the irs forms at all?
@piebaby wrote:
I think it all depends if you treat this like a job or a hobby. I treat this as a job, I keep track of everything for the IRS and I claim mileage and take all of the deductions for mileage. I turn in every penny I make, because I deduct the miles I drive there, I have always ended the year in the green, although this year I think is going to be tight.
Nature does not hurry, yet everything is accomplished. - Lao-Tzu
Edited 1 time(s). Last edit at 07/17/2020 01:25AM by Shop-et-al.
Sandyf, if you treat it as a hobby, none of your expenses are deductible, and 100%of the income is taxed!!!!
That is why you file.
That is why you file.
So why bother...consider even your small amt of mystery shopping as a business and you can then write off expenses and pay less taxes. I assume most who consider what they do, whether trading comic books for a small fee or mystery shopping once in a while do not report their small earnings at all.
@ceasesmith wrote:
Sandyf, if you treat it as a hobby, none of your expenses are deductible, and 100%of the income is taxed!!!!
That is why you file.
I do not know what other people do.
Good thing, too -- if I knew what they did, it would probably drive me crazy!!!
Good thing, too -- if I knew what they did, it would probably drive me crazy!!!
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