Hello, I'm new to MS. I am curious to how reimbursement works on our taxes. I make a generous living in my full time job. I am only doing this part time after work to experience free meals and extra income. Last year when filling taxes it said you can only file expenses if it's a certain percentage of your full income, like 5% I think. There's no way I would have enough expenses to qualify. Otherwise you must file the full job payment plus reimbursement as taxable income right? Just trying to figure out if it's worth it to be taxed on money I pay upfront. I see a lot of projects that are urgent for being filled, but they are places I wouldn't normally care to eat at. I'm torn in helping these companies out versus getting taxed on food I wouldn't normally eat. Thanks for any suggestions and insight on how to get the best financial outcome.

You only pay tax on the payment. Reimbursement does not count as income. The amount that shows on your 1099 will be just what they paid you, nothing more, it will not include reimbursements..

Really?! That is great news. I was concerned it would just show a lump sum on money received, and I would need to seperate out all the receipts of expenses paid up front. That would be a very lengthy process! Ok, was just wondering if it was worth it. Thank you!

Edited 3 time(s). Last edit at 06/22/2022 12:41AM by Catch_99.

You need to keep your own records of payment for services and reimbursements. Some MSCs include reimbursements on 1099 forms even though they should not. A bigger concern is that companies that use PayPal to send you money should not be sending out 1099 forms for Tax Year 2022. Instead, PayPal will be sending a type of 1099 which aggregates all funds sent to you by PayPal in TY 2022. That includes payment for services, reimbursements, and even money you get for selling a lamp to someone if they pay you using PayPal. It will be up to you to consult your records to determine which MSC sent you money (and how much) for payment for services, how much you received for reimbursements, etc.

There are different ways of sorting this out. I personally show all money I receive (for services and reimbursements) on Schedule C as revenue received, and then I listed reimbursement (and expenses for copies, paper, ink, etc) on a different line on Schedule C for business expenses. When you are reporting business income (net positive or net negative for the year) on Schedule C, there is no percentage involved. A deduction on Schedule C reduces your Schedule C business income.

The change in how PayPal is required to report will be new for TY 2022, and there is a lot of confusion even on this Forum. Many of us keep records using Excel. Some still use paper. Don't forget to keep track of mileage driven for mystery shopping. The IRS mileage rate for January 1 to June 30, 2002, is $0.585. This year, it will change on July 1st and increase to $0.625 per mile. The standard IRS mileage rate has traditionally amounted to about 1/3 of my gross MS gross payments for services, so it is important to track.



Edited 1 time(s). Last edit at 06/20/2022 06:22PM by myst4au.

Also keep in mind that some MSCs require you to buy something but refuse to call it a reimbursement. For instance, Intellishop has a long-standing fast food chain job where they pay a flat fee, then require you to make very specific purchases that come out of that money. Then they report everything to the IRS as income they've paid you, which is B.S. So I keep my own spreadsheet showing how much of that money I cleared and how much was spent on what they very specifically required me to purchase, and I only report the actual income.

i think Intellishop sends the just the gross flat payment amount for their national burger chain. Since it's flat payment and they dont track how much you spent, it's up to you to keep that so you know what was reimbursed and what truly was income. I also use Excel (like Myst4au mentioned). you can keep columns for mileage, cost of purchase, shop fee, etc. For flat payment shops that require purchase, i just have a formula that takes the flat payment amount and subtracts the required purchase amount. I also track cash vs CC. I just like to know how much CC bonus I get from mystery shopping alone.

Catch,
From what you said about the 5% limit, it sounds like you were filing MS income and expenses somewhere other than on Schedule C!!!!. There is no such limit for self-employment income and expenses, all of which belong on Schedule C and not anywhere else. You may have paid too much tax last year if I am correct. Also, be sure to keep track of mileage to and from MS assignments, since that is a LARGE write-off for most MSers. Again, it belongs on Schedule C.

@Catch_99 wrote:

Really?! That is great news. I was concerned ot would just show a lump sum on money received, and I would need to seperate out all the receipts of expenses paid uo front. That would be a very lengthy process! Ok, was just wondering if it qas worth it. Thank you!

Keep track of unreimbursed expenses. Like when the reimbursement doesn't cover the cost of food that you're required to order. Or the shops that pay a flat fee with no reimbursement. Or when you go out and spend money on a shop and then you don't get paid for it, for whatever reason. Or the grocery shops that require you to buy 3 things and spend $9, but don't cover anything above $9. It's nearly impossible to buy 3 things in a grocery store and have it come to exactly $9 including tax and everything. And, of course, your supplies, printer paper, ink, printer, computer. These are all things that you NEED to do these jobs.

Catch_99. There is very good information above but I did want to add that your mystery shopping income is separate from your full time job income. Mystery shopping, as mentioned above should be on a schedule C and not lumped together with the income from your other job. Also, the bookeeping is not as bad as you imagine. . Just set up some sort of spreadsheet. You do not need to track down all of your receipts. Mystery shops with reimbursement require you to send them a copy of your receipt meaning you have taken a photo or scanned them in. Just put them in a file which is reserved for mystery shopping and you will not need to "track them down" at tax time. Flat pay "reimbursements" are not as common but you can note what you spent on your spreadsheet for these in a separate column. Just be advised that you are meant to stay within the flat rate unless it is impossible at the location you shop to purchase either what is a requirement for the shop or the least expensive item at the location. So, for instance, if you are asked to buy any sandwich and the cheese or chicken sandwich is available for 6.99 but you decide to purchase a bison burger with bacon and avocado for 12.99 and you go above the flat fee the overage is not tax deductible. Be advised this is my take. There are other shoppers who interpret the rules differently.
And there are many shoppers who would like to know where you found a Bison burger with bacon and avocado for $12.99 including tax and tip.

Yes, treat your MSing as a business, (Schedule C), and not as employment.

Catch-99
Cease made a good point in that it appears that you reported your business revenue (from mystery shopping) as part of regular income (which usually means getting a W-2 form from an employer. If you did that, and especially if you had significant deductions for reimbursements and other expenses including mileage, you may want to file an amended tax return.

What is substantial? Suppose you are in the 20% marginal tax bracket. Then every $1 of reimbursement or business expense is worth $0.20 to you as a refund. If you had $500 of such items, then you may be entitled to an additional refund of $100.

If you sign up as an IC PRO on Jobslinger.com (free) you will be able to generate invoices on all of the Sassie sites that participate in this program. The invoices separate the job fee, bonus, and reimbursements for each job you complete - even for those companies that lump all of the payment together. It's a pretty neat form to compare against your own records.

Thank you so much for all the information! Yes, I've started an Excel spreadsheet to keep track of everything! Would it help to only stick to a small handful of companies that just do direct deposit? Instead of Paypal? This is the year for me to learn!

Thank you! Last year was expenses for my full time job, and I didn't quality because I didn't have enough to make the minimum! I didn't use the Schedule C, this is a new field for me! I will definitely start to log the mileage though, especially these days!

Haha, I JUST did one of those yesterday! Lol. But I did pretty good, it came out to $9.39, lol.

Thanks, I'll go look for that!

Same here, I use an excel spreadsheet which records what company, my expenses, the miles driven, I also have a column for when the shop is paid so I can see who has not paid yet. I have gotten more serious about it this year since my bills are higher but my paycheck is not.

Thank you for the information on mileage rates 2022. I did not know this

I didn't know they offered this feature? Where on the website - I can't seem to find it even though I'm pro.

If you are registered and verified as an IC PRO (IC PRO 100), you can generate an invoice from the MSC's Sassie website. Click "My Profile"; the option to generate an invoice is available in the top ("Status" ) section.

@Chix wrote:

I didn't know they offered this feature? Where on the website - I can't seem to find it even though I'm pro.