I was just wondering how much does mystery shopping hurt your income tax especially if you normally get a refund. Sure, it's nice getting checks, direct deposit, and Paypal but then you have to claim it. How much are you left with after all of these small paying jobs. Approximately what is the tax percentage for independent contractors?
That's true. I thought you could make up to $599 and not have to worry about it. However, I was told by a tax person that you have to claim everything you make. Also if you read all of the print it tells you in most contracts that you are still responsible for taxes below the $599, if you're over they will send you the 1099 probably because it's easier and you don't need all of the small receipts.
I'd like to get some feedback from all of you shoppers out there. Do you claim below $599 or not?
When you work as a contract worker you should hold out about 25% of your money .... one thing to remember is when you drive anywhere you can claim mileage on your taxes for being a secret shopper as well. and you can also claim other items being you are considered self employed! Something to ask your tax preparers as well
a reimbursement is the same as a payment, however you should keep track of all your purchases(and other mystery shopping expenses) and deduct them from your earnings as expenses. There is a tax form specifically for this kind of deduction.
I use Turbotax, and it walks me through everything pretty well.
Roy is absolutely right about the 25%, because you'll need to pay social security & medicare taxes in addition to income tax.
All income is taxable whether it is paid in cash, deposited in your account or mailed by check and regardless of whether it is reported on a 1099 form. The difference is that if one company or individual pays you more than $599 in a year, they are obligated to report that payment to the IRS -- so if you don't report it, you are likely to get caught.
BUT, that doesn't mean you have to pay taxes on the full amount. If you do mystery shopping seriously and run it like a business (i.e., you actually make some money doing it and are organized), then you get to deduct your costs of doing the work. These would include things like auto mileage, cost of making copies, even cost of equipment that you have to buy (e.g., digital camera, computer, scanner -- if these are used primarily for your business.) All of this belongs on Schedule C of your tax return. You only pay taxes on the net profits.