Its probably an old topic here and I apologize if I'm echoing what someone else has already brought up but here it goes. I live in the Coastal Bend of Texas. There are not a ton of shops down here relative to the concentrations you'd find in Houston, Austin, San Antonio, etc... Is it possible to PAINLESSLY and LEGALLY deduct business expenses like the costs of travel and lodging if I were to schedule some shops in these cities? I know the answer is probably "no" unless I have a business set up--I do not. But I was wondering if anyone has done this. Thanks in advance.

IMHO, you can. Reasonable travel expenses are deductible, but you should meet the IRS test of having an intent to make a profit. So, don't stay in a $ 400-a-night hotel (which would technically still be legal) or eat a $100 dinner. I would suggest a $100 / night motel if there is a safe and clean one, plus modest meals. The mileage back and forth would be deductible at the current IRS rate of $0.585 / mile. Suppose you drive 200 miles (easy 9in Texas) over the course of 2 days, spend $150 on a motel for 1 night, and $60 on 6 meals, then you have expenses of $327. You need to have revenue of at least $327 to even break even. There are people on this forum who argue that they just need to pay for their gas, not $0.575 per mile. I and some others argue that this is false economics since the $0.585 covers gas, oil, windshield wipers, depreciation, insurance, and repairs. Yes, depreciation and insurance happen anyway, so just consider the others. At $5 per gallon, if you get 20 miles per gallon, it now costs $0.25 just for gas. Plus, the value of your car when you trade it in depends on the total mileage.

So, back to your question. Can you deduct the cost of travel, lodging, and meals? Yes. My advice is to be realistic and to be sure that you will really be making money. Calculate your hourly rate as well.

Actually, you do not need to make a profit on every business related trip since maintaining relations with the MSCs so that the schedulers continue to consider you for shops, getting experience with different types of shops or clients, and many other business purposes are legitimate. Just keep your lodging and meal expenses reasonable. Basically, when you read that a shopper is doing/has done "a route" those are often involving overnight expenses and travel. Deductions can include: highway tolls, parking reasonable meal and lodging expenses. The objective of your business for the year should be to make a profit; daily profit is not required for every day or for every business-related trip. So, for instance, attending a shopper education program is a legitimate business expense.

I agree that you can deduct. I did so for years as a self-employed writer, without having set up a "business." As mentioned above, my intent was to make a profit -- i.e. I wasn't writing for fun. Especially because you can't get as many jobs where you're living.

I would also try to schedule busy routes, or as busy as you can stand them, for those trips so it's clear your purpose is to make money.

That said, I recently paid my own airfare to do a resort mystery shop, and I'm not deducting that airfare because I combined the trip with visiting a friend. And I paid my own lodging for an airfare mystery shop, but that was because I stayed at the destination for a week's vacation.

You absolutely can deduct these expenses, as long as reasonable and necessary. In the past, you could only deduct 50% of your meal expenses, but I believe that for 2021 and 2022, the IRS has made this 100% (which is supposed to be temporary, I think). But you can deduct 100% of your lodging, your mileage, etc.

You *do* have a business. You are a self-employed sole proprietor. You don't need to be set up as any type of incorporated entity, LLC, partnership, etc. Doing business under your SS# is fine.

@walesmaven wrote:

Actually, you do not need to make a profit on every business related trip since maintaining relations with the MSCs so that the schedulers continue to consider you for shops, getting experience with different types of shops or clients, and many other business purposes are legitimate. Just keep your lodging and meal expenses reasonable. Basically, when you read that a shopper is doing/has done "a route" those are often involving overnight expenses and travel. Deductions can include: highway tolls, parking reasonable meal and lodging expenses. The objective of your business for the year should be to make a profit; daily profit is not required for every day or for every business-related trip. So, for instance, attending a shopper education program is a legitimate business expense.

In no way am I arguing...I am just playing "what if". Can I file this on a standard 1040 or one of the schedules? Like my securities have to be listed under Schedule F. Is there a schedule where I'd list business expenses like a stay at the Holiday Inn or is it a totally different form? Do I have to designate myself as a business and have one set of taxes for me and another for my business?

See Schedule C (business income/business expenses) and schedule SE (pay self-employment taxes on the net profit from schedule C)

@BirdyC wrote:

You absolutely can deduct these expenses, as long as reasonable and necessary. In the past, you could only deduct 50% of your meal expenses, but I believe that for 2021 and 2022, the IRS has made this 100% (which is supposed to be temporary, I think). But you can deduct 100% of your lodging, your mileage, etc.

You *do* have a business. You are a self-employed sole proprietor. You don't need to be set up as any type of incorporated entity, LLC, partnership, etc. Doing business under your SS# is fine.

So when I file the taxes, I have to itemize? Is it still an either/or between standard deduction and itemize?

If you are asking are you able to claim the standard deduction if you use Schedule C, the answer is yes. You do not have to itemize categories that would be part of the standard deduction. Business expenses and revenue are entirely different things. If you are asking whether you need to have backup justifications for the business deductions that you put on Schedule C, the answer is yes.

@metro25782 wrote:

@BirdyC wrote:

You absolutely can deduct these expenses, as long as reasonable and necessary. In the past, you could only deduct 50% of your meal expenses, but I believe that for 2021 and 2022, the IRS has made this 100% (which is supposed to be temporary, I think). But you can deduct 100% of your lodging, your mileage, etc.

You *do* have a business. You are a self-employed sole proprietor. You don't need to be set up as any type of incorporated entity, LLC, partnership, etc. Doing business under your SS# is fine.

So when I file the taxes, I have to itemize? Is it still an either/or between standard deduction and itemize?

Schedule C is where you declare your MS income and expenses. It is quite straightforward. Turbo Tax will walk you through the various categories of expenses for Schedule C. You just enter to total for each category, such as auto expenses, supplies (paper, ink, etc); travel; meals, etc. Self-Employment tax is based on the net business income that is computed on Schedule C. All you need is your social Security number to prepare Sched C and the SE tax Schedule. All of this has NOTHING to do with the itemized deduction vs standard deduction choice that you make on Form 1040.

@metro25782 wrote:

In no way am I arguing...I am just playing "what if". Can I file this on a standard 1040 or one of the schedules? Like my securities have to be listed under Schedule F. Is there a schedule where I'd list business expenses like a stay at the Holiday Inn or is it a totally different form? Do I have to designate myself as a business and have one set of taxes for me and another for my business?

You do not have to "declare" yourself a business. Just file a Schedule C with your standard tax return. You don't need a separate set of taxes. Just keep your income and expenses separate in your own bookkeeping.

If I were you, I'd have a tax professional do your taxes, at least the first time around. I don't think you want to try to do them yourself the first time, even using a program like Turbo Tax. That can't give you the kind of knowledge and advice that it sounds like you need. For example, my tax guy figures out what equipment I should depreciate or whether I should take the entire deduction in one year, depending on how much profit I showed. I've been self-employed for more than 35 years, and I have a tax pro do my taxes. Always. I know some people feel confident in using software, but I'd rather leave it in his capable hands! I don't want to deal with it, and I trust him more than I trust myself to do my taxes right!

One last question.

Is there a threshold for doing this? I just recently got back into mystery shopping this year. I did like 15 in May all within 50 miles of my apartment--most within 10 miles. I'll probably do 20-30 in June. And at some point I will do the route in Austin/San Antonio, staying overnight.

The question is whether or not I have to claim them all or can I just claim the route as the one-off. What I would not want to do is try to re-trace my mileage from my apartment to JITB on Interstate 37 (and by the way, do I do it to AND from or just as a here to there--what if I ran some errands or went to my real job after the shop)?

Anyway, this is very interesting and it looks like I could recoup at least some of my expenses. If I'm understanding it correctly, I can both do the standard deduction and then "create" a business on schedule C. I've got to study the forms and all but this is encouraging. Thank you all so much.

You can claim mileage even if you do one shop a year. Google Maps and MapQuest can tell you the driving miles between addresses to help you retrace your mileage.

@mystery2me wrote:

You can claim mileage even if you do one shop a year. Google Maps and MapQuest can tell you the driving miles between addresses to help you retrace your mileage.

Absolutely correct information! And when I forget to log my miles on a shop, I do as suggested: run a MapQuest using the route I took and record the mileage.

If you go from your home to a shop and back, you deduct the entire trip. If you leave from your regular job to do a shop, you take the mileage from there and then home. If you do a shop, then go to your regular job, then home, your business mileage would end at your job. If I run errands during shopping trips, I usually just estimate how many miles those took me out of my way and deduct that from the business mileage. But I generally don't do that. I try to batch errands together to do on one morning or afternoon a week so that I'm not making side trips while on business.

Many of us keep some sort of running spreadsheet where we record data about each shop as we go along.ine is chronological but you can also do it by msc or all sorts of ways that make sense to you. At any time if you set your spread sheet up on your computer you can sort by whichever column makes sense to you. I would recommend starting your spreadsheet now and at your leisure go back and fill in the info for the jobs you did last month. Columns I use are mileage,date Ms company.name and location of shop,fee,reimbursement,bonus,date and Amt paid

The "threshold" is $400. Any income you earn over $400 in a calendar year (most of us use calendar year as our fiscal year), you must declare the income. Any company that pays you over $600 in a calendar year as an independent contractor (that's us) must provide a 1099 form to you and the gov't. If you work for 6 companies and earn over $600 with each one, you should receive 6 1099 forms.

I personally offset most of my mystery shopping income with the mileage deduction, because the absolute closest shop to me is 45 miles away.

Consult with a tax person. I have been doing this work for almost 20 years., I deduct all expenses as long as they were not reimbursed by the company. I have never had an issue with the IRS. I get my taxes done by a professional who knows all the new tax rules for the year.

@Rubi wrote:

Consult with a tax person.

This ^^

If someone is new at this and/or new at declaring income on Schedule C, the first year is so *not* the one to be tackling it on one's own. After some 30 years of self-employment, I still have a pro do mine.

@ceasesmith wrote:

The "threshold" is $400. Any income you earn over $400 in a calendar year (most of us use calendar year as our fiscal year), you must declare the income. Any company that pays you over $600 in a calendar year as an independent contractor (that's us) must provide a 1099 form to you and the gov't. If you work for 6 companies and earn over $600 with each one, you should receive 6 1099 forms.

I personally offset most of my mystery shopping income with the mileage deduction, because the absolute closest shop to me is 45 miles away.

Wow, 45 miles! Thats unfortunate.

Thanks for the reply.