Hello

Some mystery shops allow you to return the product after testing it if the shop allows it, then you would get a refund.

I guess someone has to have been in this situation, how did you handle it?

Let's assume the following:

You get paid for the actual work you did, i.e salary (A)
You get reimbursements for the your expenses, i.e the purchase ( B )
The actual expense, i.e the purchase (C)

So to calculate the amount you would owe tax on you would take A + B - C = The amount you owe taxes on.

However if we add the following to the scenario - some mystery shops allow you to return the product you purchased if the shop allows it. Then you would get a refund amount for the product (D) However you also got reimbursed for the expense. How would you file the product refund (D) in the taxes?

Edited 1 time(s). Last edit at 05/21/2021 06:26PM by test4312523523523.

Most MSCs are not reporting your reimbursement. However if you're returning an item, you can't claim it as a purchase for expenses.

So your equation would be A + B - C + D = taxable income

This is not a usual enough situation for most shoppers to have to deal with. I have seen it only where the store and the client are not the same. Most frequently the client is a credit card making certain that the store is offering the card at some point during the transaction.

Edited 1 time(s). Last edit at 05/21/2021 08:52PM by Flash.

Yes, D would be taxable income. But, don't forget when one retains an item for which one has been reimbursed, the value of the item is taxable income. The best thing is to never retain any item for which one has been reimbursed - either donate it immediately to charity, destroy the item (retaining evidence of its destruction), or to return it and take the refund as taxable income.

Oh, no. Never take tax advice off a public forum of non-tax professionals!

An item's value does NOT generate taxable income by merit of being retained by the purchaser -- IF the purchase was a REQUIRED portion of your job.

They are "reimbursed business expenses", which are NOT taxable.

However, if your purchase is of some value (I'm not talking $1 candy bar at the gas stations, folks; more like a Coach wallet, for example), and you list it on e-bay and sell it, the funds from that resale IS taxable income. With a cost basis of $0, as you were reimbursed for the item.

Technically, if you purchase, then return for full credit an item for which you receive reimbursement, yes, indeed, the refund is taxable income.

Theoretically, anyway. In reality, if you're talking about a few hundred dollars over the course of the tax year, the chances of being caught are (let's see if I can spell this) infinitesimal. If you do this regularly, I would suggest merely reporting the gross on the 1099 and not deducting the "reimbursed business expense" on your Schedule C. That way, you're reporting and paying tax on all the funds received, without overburdening yourself with the required bookkeeping elements.

I recently contemplated copy & paste an article on self-employed "gig" workers for taxes. As I read it, I found it so full of errors that it could mislead readers into egregious tax errors. And this article was from Forbes, who should have known better! So, I say again, do NOT take tax advice from non-professionals!