Question about taxes
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No. Reimbursements are not taxable. See the tax information in the New Mystery Shopper area.
Sorry Flash! I found it!!!
So as I read it, if I made $480 in reimbursements for the year (just and example) I don't count this as tax or income? Correct?
Liz
So as I read it, if I made $480 in reimbursements for the year (just and example) I don't count this as tax or income? Correct?
Liz
Reimbursements are not TAXABLE to you. You may choose to include them in the overall income of your business and deduct them out or you may choose to list only the fees and bonuses as income of your business. Either would be correct, but as I have stated, my personal preference is to include every cent sent to me and then deduct out the reimbursements. I think it puts a more credible look to the business overall. And only when your bottom line income from Schedule C (i.e. after mileage and any/all other deductions) is over $400 are you subject to self employment taxes.
I did my taxes online. Not for the tax purpose but for the information portion. I still postal file my taxes but I needed the information regarding the 1099-Misc form.
I used three different online services. I wanted to know which one was right. I did arrive at two difeerent "refunds/owed taxes" and that was not good. I believed Turbotax until a different tax service said I was due a work credit. TT explained I was not. Then it became a cyber argument.
I went to another OL service, The most that could happen is ---->"I would get a third balane more or less than b4.'' The third service gave me the credit but it reduced my refund/owed status. I had used the 1099 M as a basic income.
B/c I did not understand the role of the 1099-MISC, The third service placed the 1099 in a business casual category. (I also had to read the info on the MISC form to understand where it went too.) I had to used the Deluxe version of the OL service to find this stuff out.
I did the deluxe version on the three service and got the same answer. To me that was good. I had to attach forms Schedule C-EZ, Schedule SE, and Schedule M.
The wording on the SE form was so complicated that I placed my name and ID on the form and sent it in with my taxess. The deluxe version said I owed a certain amout for taxes, I believed them.
If it is wrong they will audit and send me a bill. At least I made an effort to file on time. and you do get credit for that.
I will paper file until the goverement says they will no longer accept paper filing. :-)
Edited 1 time(s). Last edit at 04/21/2011 03:18AM by sojo917.
I used three different online services. I wanted to know which one was right. I did arrive at two difeerent "refunds/owed taxes" and that was not good. I believed Turbotax until a different tax service said I was due a work credit. TT explained I was not. Then it became a cyber argument.
I went to another OL service, The most that could happen is ---->"I would get a third balane more or less than b4.'' The third service gave me the credit but it reduced my refund/owed status. I had used the 1099 M as a basic income.
B/c I did not understand the role of the 1099-MISC, The third service placed the 1099 in a business casual category. (I also had to read the info on the MISC form to understand where it went too.) I had to used the Deluxe version of the OL service to find this stuff out.
I did the deluxe version on the three service and got the same answer. To me that was good. I had to attach forms Schedule C-EZ, Schedule SE, and Schedule M.
The wording on the SE form was so complicated that I placed my name and ID on the form and sent it in with my taxess. The deluxe version said I owed a certain amout for taxes, I believed them.
If it is wrong they will audit and send me a bill. At least I made an effort to file on time. and you do get credit for that.
I will paper file until the goverement says they will no longer accept paper filing. :-)
Edited 1 time(s). Last edit at 04/21/2011 03:18AM by sojo917.
I have never used the online versions, primarily because I do a 'first approximation walk through' on our taxes shortly after Thanksgiving so that we can make those adjustments necessary before the end of the year to minimize tax lability. Since I do tax returns for 8 of us, each of whom files "single", there can be substantial savings by paying 2 years of property taxes in the same year and in the year we do that, clear closets for Goodwill and do other household "lightening" of items to be donated with proper receipts, write the checks for charity, catch up on doctor and dental visits, get the glasses, etc. etc. For my 'mystery shopping', that early walk through can determine whether this is the year to purchase new equipment or stock up on supplies for the following year or whether this is the year to take more or fewer distant shops. A little tax planning can make a whole lot of difference, so I find it enormously beneficial to purchase TurboTax as soon as it hits the stores. I have always found that it accurately handles every situation I throw at it. If I end up with numbers showing up in wrong places, when I go back I discover that it was ME that read the question wrong.
For our family, this was the "double" year to pay and claim two years of property taxes in the same calendar year to boost the itemized deductions well past the standard deduction. Thus there were lots of charitable deductions of both cash and goods to be claimed and actually two returns needed to be paper filed because there were too many individual donation trips to be handled by efile. Otherwise everything was efiled and refunds came quickly. Everybody working qualified for the work credit.
For our family, this was the "double" year to pay and claim two years of property taxes in the same calendar year to boost the itemized deductions well past the standard deduction. Thus there were lots of charitable deductions of both cash and goods to be claimed and actually two returns needed to be paper filed because there were too many individual donation trips to be handled by efile. Otherwise everything was efiled and refunds came quickly. Everybody working qualified for the work credit.
> For our family, this was the "double" year to pay
> and claim two years of property taxes in the same
> calendar year to boost the itemized deductions
> well past the standard deduction. Thus there were
> lots of charitable deductions of both cash and
> goods to be claimed and actually two returns
> needed to be paper filed because there were too
> many individual donation trips to be handled by
> efile. Otherwise everything was efiled and
> refunds came quickly. Everybody working qualified
> for the work credit.
Are you talking about the "making work pay" credit? If so, pretty much everyone got that one. It was taken out over the last year for people who receive a paycheck...withholding was adjusted to add up to a $400 credit by year's end. If not, then ignore this post!
> and claim two years of property taxes in the same
> calendar year to boost the itemized deductions
> well past the standard deduction. Thus there were
> lots of charitable deductions of both cash and
> goods to be claimed and actually two returns
> needed to be paper filed because there were too
> many individual donation trips to be handled by
> efile. Otherwise everything was efiled and
> refunds came quickly. Everybody working qualified
> for the work credit.
Are you talking about the "making work pay" credit? If so, pretty much everyone got that one. It was taken out over the last year for people who receive a paycheck...withholding was adjusted to add up to a $400 credit by year's end. If not, then ignore this post!
Yes, that is the credit I am referring to. And indeed pretty much everyone working received it. You were ineligible if your business had a net loss, I believe. Withholding may have been adjusted to reflect the prospective credit, but total tax liability was unchanged without claiming the credit on a Schedule M. In other words, if your tax liability was $3000 and your did not claim the credit you needed to pay in $3000, whether that was done as withholding throughout the year, estimated payments or payment with your return. If your liability was $3000 and you claimed the credit, you only needed to pay in $2600.
What is withheld from a paycheck is only modestly reflective of what ultimately the tax liability will be. I know of folks who claim only 1 exemption so they can receive a large refund as a lump sum to put towards a special purchase (vacation, appliances, etc.) and I know of folks who claim way more exemptions than the ultimately are entitled to because they hate having "their money" out "on loan" with IRS. My personal preference was always to overclaim a little bit and send in a check with my return. I kept it reasonably close so I would not be subject to underpayment penalties, but I never thought IRS was a good "bank" since they didn't pay interest.
What is withheld from a paycheck is only modestly reflective of what ultimately the tax liability will be. I know of folks who claim only 1 exemption so they can receive a large refund as a lump sum to put towards a special purchase (vacation, appliances, etc.) and I know of folks who claim way more exemptions than the ultimately are entitled to because they hate having "their money" out "on loan" with IRS. My personal preference was always to overclaim a little bit and send in a check with my return. I kept it reasonably close so I would not be subject to underpayment penalties, but I never thought IRS was a good "bank" since they didn't pay interest.
It would be nice to have a CPA opinion on this but there are too many variables to generalize.
Is this a business as opposed to a hobby as determined by IRS rules? If it is a business, after all, does the tax filer file a Schedule C? If travel is reimbursed on what basis? Does the filer then use actual expenses with receipts or the Standard Mileage Allowance backed under audit by contemporaneous milage records.
Likely, for many it may just be a hobby, that is they earn less than the minimum reportable anyway or it is treated that way for other reasons in which case there are no allowable business expenses.
But the true test will be under audit. And you ask for one of those if you have a home office and declare office expenses as that has been an audit trigger for years and with thousands of newly hired IRS auditors in the field your odds are better. Cheer up.
Jimmy the geek
Is this a business as opposed to a hobby as determined by IRS rules? If it is a business, after all, does the tax filer file a Schedule C? If travel is reimbursed on what basis? Does the filer then use actual expenses with receipts or the Standard Mileage Allowance backed under audit by contemporaneous milage records.
Likely, for many it may just be a hobby, that is they earn less than the minimum reportable anyway or it is treated that way for other reasons in which case there are no allowable business expenses.
But the true test will be under audit. And you ask for one of those if you have a home office and declare office expenses as that has been an audit trigger for years and with thousands of newly hired IRS auditors in the field your odds are better. Cheer up.
Jimmy the geek
Rule of thumb is that it is a legitimate business if it shows a profit at least 3 out of the past 5 years. If it does not meet that basic test then IRS has the option to determine it is a hobby at which point mileage and other deductions are not allowed and all fees and bonuses become straight income on page 1 of your 1040. As for not claiming the income because it is 'too small', you do that at your own peril. See the more expanded discussion in the post regarding taxes in the New Mystery Shopper section.
I think one important thing was lost in this discussion from the original post.
All income must be reported. That is, if you received any shop payments, you have to report them to the IRS, normally using Schedule C because it allows you to then deduct other expenses, such as 50 cents a mile (if documented), to arrive at the profit/loss of your business. And I believe it's correct that if the profit is over $400, then you owe self-employment tax - which used to be double the rate of Social Security taxes for wage employees, likely still is.
But ANY income must be reported. The $400 is only important after you've reported all the income on the Sched C.
And yes, reimbursements can be ignored as income entirely, or claimed as income and then deducted as outright expenses. Don't class them as meals however, because you'll only get partial credit back. This year, my first as a shopper, I just ignored them.
A key item is keeping track of mileage. This is easy if you do it as you go. Ideally, create a spreadsheet for each company you do work for. Make columns for the Date, Job Descript, Job #, time and other things related to it, then for Pay, Cost and Reimbursement. Include a column for mileage and simply use MapQuest or another program to figure the round trip mileage. You want a separate column for Cost and Reimbursement because sometimes you might order something extra that takes you over the limit - or you might not get paid because you didn't complete the shop properly. Any excess Cost becomes a business expense.
Keeping a mileage log like this satisfies the requirements of the IRS. So does keeping a journal in the car but I find that a lot more trouble. And records like this will make you sail through any audit. You'll love getting the 50 cents/mile off the Sched C too!
Other reasonable business expenses are meals you eat on the road for longer shops/audits. If you buy a camera that's used mainly for shops, it's an expense. Paper supplies, ink cartridges, a hand scanner to use on the road or even a laptop if you do out-of-town assignments. Avoid trying to deduct a home office, it's a red flag for audits and requirements are very strict.
(This is my first tax year doing shops, but I've filed as self-employed for most of the past 30 years.)
All income must be reported. That is, if you received any shop payments, you have to report them to the IRS, normally using Schedule C because it allows you to then deduct other expenses, such as 50 cents a mile (if documented), to arrive at the profit/loss of your business. And I believe it's correct that if the profit is over $400, then you owe self-employment tax - which used to be double the rate of Social Security taxes for wage employees, likely still is.
But ANY income must be reported. The $400 is only important after you've reported all the income on the Sched C.
And yes, reimbursements can be ignored as income entirely, or claimed as income and then deducted as outright expenses. Don't class them as meals however, because you'll only get partial credit back. This year, my first as a shopper, I just ignored them.
A key item is keeping track of mileage. This is easy if you do it as you go. Ideally, create a spreadsheet for each company you do work for. Make columns for the Date, Job Descript, Job #, time and other things related to it, then for Pay, Cost and Reimbursement. Include a column for mileage and simply use MapQuest or another program to figure the round trip mileage. You want a separate column for Cost and Reimbursement because sometimes you might order something extra that takes you over the limit - or you might not get paid because you didn't complete the shop properly. Any excess Cost becomes a business expense.
Keeping a mileage log like this satisfies the requirements of the IRS. So does keeping a journal in the car but I find that a lot more trouble. And records like this will make you sail through any audit. You'll love getting the 50 cents/mile off the Sched C too!
Other reasonable business expenses are meals you eat on the road for longer shops/audits. If you buy a camera that's used mainly for shops, it's an expense. Paper supplies, ink cartridges, a hand scanner to use on the road or even a laptop if you do out-of-town assignments. Avoid trying to deduct a home office, it's a red flag for audits and requirements are very strict.
(This is my first tax year doing shops, but I've filed as self-employed for most of the past 30 years.)
Be very careful claiming meals you ate along the road as a business expense. There are specifics with IRS about what can and cannot be claimed. IRS's basic assumption is that you would have needed to have meals anyway, whether you were on the road or not. This is why picking up meal shops on a road trip can avoid the issue for you entirely.
Lizdreamz Wrote:
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> I know that if you make more than $400 you have to
> file for self-employment taxes. I was just
> wondering...does this include reimbursements?
>
i'm not sure about reimbursements, but a friend of mine who is a tax attorney told me something interesting.
he says that i can deduct 50 cents per mile that i drive to/from each location from my taxes. therefore, i now document mileage to/from each shop. google maps calculates exact distances for me.
he told me to document each shop in a record book according to date, pay and mileage.
i'm new to mystery shopping, but that's what my tax attorney friend says.
-------------------------------------------------------
> I know that if you make more than $400 you have to
> file for self-employment taxes. I was just
> wondering...does this include reimbursements?
>
i'm not sure about reimbursements, but a friend of mine who is a tax attorney told me something interesting.
he says that i can deduct 50 cents per mile that i drive to/from each location from my taxes. therefore, i now document mileage to/from each shop. google maps calculates exact distances for me.
he told me to document each shop in a record book according to date, pay and mileage.
i'm new to mystery shopping, but that's what my tax attorney friend says.
Actually for 2011 the amount is 51 cents per mile. The rate gets adjusted most every year for business mileage for the coming year sometime in November or December. In a few recent years there has also been a mid year adjustment made so miles prior to July 1 may be deducted at one rate and those on July 1 or later at another rate. It is a little early to know if there will be a mid year adjustment for 2011, but with the spike in gas prices it is likely. On the other hand, for the past few days the price of a barrel of oil has dropped from around $110 per barrel to around $99 per barrel so we may be seeing some relief at the pump as we move into summer. That could jeopardize a mid year adjustmnt.
Flash Wrote:
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> Actually for 2011 the amount is 51 cents per mile.
> The rate gets adjusted most every year for
> business mileage for the coming year sometime in
> November or December. In a few recent years there
> has also been a mid year adjustment made so miles
> prior to July 1 may be deducted at one rate and
> those on July 1 or later at another rate. It is a
> little early to know if there will be a mid year
> adjustment for 2011, but with the spike in gas
> prices it is likely. On the other hand, for the
> past few days the price of a barrel of oil has
> dropped from around $110 per barrel to around $99
> per barrel so we may be seeing some relief at the
> pump as we move into summer. That could
> jeopardize a mid year adjustmnt.
thank you so much. that is good to know.
like i say, i'm just getting started at mystery shopping (for about three months now), and i find information such as you offer quite invaluable. i'm really glad to have the opportunity to post/read in this forum. this forum is really a great thing, with great people such as yourself here.
-------------------------------------------------------
> Actually for 2011 the amount is 51 cents per mile.
> The rate gets adjusted most every year for
> business mileage for the coming year sometime in
> November or December. In a few recent years there
> has also been a mid year adjustment made so miles
> prior to July 1 may be deducted at one rate and
> those on July 1 or later at another rate. It is a
> little early to know if there will be a mid year
> adjustment for 2011, but with the spike in gas
> prices it is likely. On the other hand, for the
> past few days the price of a barrel of oil has
> dropped from around $110 per barrel to around $99
> per barrel so we may be seeing some relief at the
> pump as we move into summer. That could
> jeopardize a mid year adjustmnt.
thank you so much. that is good to know.
like i say, i'm just getting started at mystery shopping (for about three months now), and i find information such as you offer quite invaluable. i'm really glad to have the opportunity to post/read in this forum. this forum is really a great thing, with great people such as yourself here.
Meal expenses for trips where you start and end the day at home are treated differently than meal expenses on a "business trip," that involves overnights on the road. The simplest way to cover all the bases is to report all fees, required purchases, and travel bonus as income and all legitimate travel expenses (miles, meals when away from home base, hotels, road and bridge tolls,required shop purchases) as claimed expenses of doing business on your Schedule C.
I have been self-employed for 40+ years and have only been audited once. That audit did NOT involve self-employement income or expenses (Status of a graduate student stipend was the "issue."
and I passed with no problems.
I have been self-employed for 40+ years and have only been audited once. That audit did NOT involve self-employement income or expenses (Status of a graduate student stipend was the "issue."
and I passed with no problems.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.
Shopping from the Carolinas to New York
Have video cam; will travel
Poor customer service? Don't get mad; get video.
And because there are a lot of 'if->then->else' issues about what meals are deductible and to what extent, it does make sense to read the IRS guidelines. Similarly, when you have another job than MSing outside the home it makes sense to read the IRS guidelines about mileage because "commuting" miles are not deductible as business mileage, so if you do two shops on your way to work and three more on your way home, all or some of that mileage is not deductible.
vince Wrote:
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> he says that i can deduct 50 cents per mile that i
> drive to/from each location from my taxes.
> therefore, i now document mileage to/from each
> shop. google maps calculates exact distances for
> me.
>
> he told me to document each shop in a record book
> according to date, pay and mileage.
>
It is essential to keep a mileage log. And not to nitpick, Vince, but Google, Mapquest, TripTik, etc. do not calculate exact miles. Maybe they're 'as the crow flies', don't know. I have found discrepancies by as much as 20% between an online mapping site and my car's trip meter. I'm so used to resetting the trip meter, I automatically do it even when running a non-shopping errand!
-------------------------------------------------------
> he says that i can deduct 50 cents per mile that i
> drive to/from each location from my taxes.
> therefore, i now document mileage to/from each
> shop. google maps calculates exact distances for
> me.
>
> he told me to document each shop in a record book
> according to date, pay and mileage.
>
It is essential to keep a mileage log. And not to nitpick, Vince, but Google, Mapquest, TripTik, etc. do not calculate exact miles. Maybe they're 'as the crow flies', don't know. I have found discrepancies by as much as 20% between an online mapping site and my car's trip meter. I'm so used to resetting the trip meter, I automatically do it even when running a non-shopping errand!
Same here, Mert. The trip meter is, for me, the next best thing to chocolate.
I've heard that you don't have to pay taxes for reimbursements because they are not considered income.
I've also heard that you will not receive a 1099 from a company unless you earn more than $600 in a year for that company.
If the company doesn't give you a 1099, why should a person report the income for less than $600????
Here's a scenario:
You earned 1000.00 in fees for a mystery shopping company (they give you a 1099 at end of year for 1000.00.)
Your deductions for this company are $750.00 ---your net income is $250.00
Or your deductions are $1025.00---you have a loss of $25.00.
I've also heard that you will not receive a 1099 from a company unless you earn more than $600 in a year for that company.
If the company doesn't give you a 1099, why should a person report the income for less than $600????
Here's a scenario:
You earned 1000.00 in fees for a mystery shopping company (they give you a 1099 at end of year for 1000.00.)
Your deductions for this company are $750.00 ---your net income is $250.00
Or your deductions are $1025.00---you have a loss of $25.00.
You are correct on your first two statements.
As for the third, on the positive side there is the aspect of showing a modest profit for your business each year. IRS wants to see profitability in at least 3 of the past 5 years. You can certainly control your degree of profitability with expenses as offsets. If I ONLY claimed work from companies from whom I received 1099s I would not be profitable if I claimed all legitimate expenses. Claiming every penny of income and expenses still leaves darn little profit. Another positive, which is of course a personal issue, is knowing that you haven't cheated your fellow taxpayers. Maybe you will never get caught, maybe you can 'play dumb' with little or no consequences if you are caught, but knowing you do the right thing adds to most folks' stature in their own eyes. Moral decision.
On the flip side of that, lets assume that a company you did $400 in work for gets audited by IRS and shows in their expense records that they paid $400 to your social security number. Should IRS decide to follow through and check as part of their check on the company, you could be in a squishy place. Likely? No. A possibility? Vaguely yes.
Your scenario I don't quite understand. Your 1099 will be for fees only, so theoretically your deductions would only be your mileage. So if you were 1099ed for $1000 I don't see how you are having deductions for the company and a second round of deductions as well.
As for the third, on the positive side there is the aspect of showing a modest profit for your business each year. IRS wants to see profitability in at least 3 of the past 5 years. You can certainly control your degree of profitability with expenses as offsets. If I ONLY claimed work from companies from whom I received 1099s I would not be profitable if I claimed all legitimate expenses. Claiming every penny of income and expenses still leaves darn little profit. Another positive, which is of course a personal issue, is knowing that you haven't cheated your fellow taxpayers. Maybe you will never get caught, maybe you can 'play dumb' with little or no consequences if you are caught, but knowing you do the right thing adds to most folks' stature in their own eyes. Moral decision.
On the flip side of that, lets assume that a company you did $400 in work for gets audited by IRS and shows in their expense records that they paid $400 to your social security number. Should IRS decide to follow through and check as part of their check on the company, you could be in a squishy place. Likely? No. A possibility? Vaguely yes.
Your scenario I don't quite understand. Your 1099 will be for fees only, so theoretically your deductions would only be your mileage. So if you were 1099ed for $1000 I don't see how you are having deductions for the company and a second round of deductions as well.
So will the MSC send a 1099 out if you total more than $600 in shop fees alone for the year? Or will they still send one out if your $600 total is both shop fees and reimbursements?
The 1099 should be fees and bonuses only. There was one mentioned this past year that included fees and reimbursements. I have one that routinely includes mileage money as part of the fee. But it really doesn't matter because IRS allows a larger mileage deduction than companies pay for mileage, so the mileage money I generally throw into "bonus" anyway so that I can take the IRS mileage. Because I claim every cent received (fees, bonuses, reimbursements etc.) as income and then subtract out reimbursements, even if a company erroneously reports the reimbursements on a 1099 it is not going to throw me out of whack.
Flash Wrote:
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> The 1099 should be fees and bonuses only. There
> was one mentioned this past year that included
> fees and reimbursements. I have one that
> routinely includes mileage money as part of the
> fee. But it really doesn't matter because IRS
> allows a larger mileage deduction than companies
> pay for mileage, so the mileage money I generally
> throw into "bonus" anyway so that I can take the
> IRS mileage. Because I claim every cent received
> (fees, bonuses, reimbursements etc.) as income and
> then subtract out reimbursements, even if a
> company erroneously reports the reimbursements on
> a 1099 it is not going to throw me out of whack.
OK - thanks for the help! I think I will just count mileage as a bonus as well, that will be a lot easier come tax time next year!
-------------------------------------------------------
> The 1099 should be fees and bonuses only. There
> was one mentioned this past year that included
> fees and reimbursements. I have one that
> routinely includes mileage money as part of the
> fee. But it really doesn't matter because IRS
> allows a larger mileage deduction than companies
> pay for mileage, so the mileage money I generally
> throw into "bonus" anyway so that I can take the
> IRS mileage. Because I claim every cent received
> (fees, bonuses, reimbursements etc.) as income and
> then subtract out reimbursements, even if a
> company erroneously reports the reimbursements on
> a 1099 it is not going to throw me out of whack.
OK - thanks for the help! I think I will just count mileage as a bonus as well, that will be a lot easier come tax time next year!
I do that only for that one company, where the company is reporting it as income to me. But then again, most companies don't suggest a separate mileage payment but rather call it a flat bonus up front and treat it accordingly.
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