The Mystery Shopper’s Manual

The end of the year is a good time to get things in order and start pulling together the records that you will need to file your tax returns. And even at this late date, there are things you can do to save money on your taxes this year, or plan for next year’s tax return.

Start by doing a quick tax calculation. You may not have every bit of information you will need to file your tax return, but you should have enough data that you can do a rough estimate of how much tax you owe for the year. Compare that to how much you paid, via withholding if you or your spouse are employed, and estimated tax payments.

If it appears that you have underpaid your taxes by $1000 or more, you may be charged a penalty by the IRS. The penalty is waived if (1) you paid at least 100% of the amount owed on your previous year’s tax return or (2) you paid (via withholding and /or estimated tax payments) at least 90% of the present year’s liability. Remember that there is still one more estimated tax payment due on January 18, 2011, if you make estimated tax payments.
…continue reading Mystery Shopper Income Tax Planning

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Most people are familiar with how income taxes work when you are an employee. Your employer issues paychecks to you showing your gross wages or salary, the amounts deducted for Federal Income Tax, Social Security tax, Medicare tax, and any state or local taxes. You receive the net amount of your wages less the amount withheld for taxes. Each year you file a tax return where your actual tax is calculated, and you pay any additional tax owed or get a refund if too much was withheld from your paychecks.

Mystery shopper taxes are different. Mystery shoppers are usually considered Independent Contractors (IC), not employees. That means that taxes are not withheld from the pay we receive from secret shopping companies, and we are responsible for paying the taxes on our profits directly to the Treasury Department.

So how does it work when you are both an employee and an Independent Contractor? In many ways it is the same as when you were only an employee. You file everything on one tax return and pay taxes calculated on your total income. However, like everything else in the tax code, it isn’t quite that simple.
…continue reading Mystery Shopper Taxes and Your “Real Job”

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If you pay quarterly estimated income taxes, remember that your fourth-quarter estimated tax payment (using form 1040-ES) for 2009 is due on January 15, 2010. You may delay making this payment until February 1, 2010, if you file your 2009 return (Form 1040) and pay any tax due by February 1, 2010.

Most mystery shoppers are not required to pay quarterly estimated taxes, because mystery shopping represents a small portion of their overall family income. However, if mystery shopping and other independent contractor or small business income makes up a significant part of your income, you should determine if you need to pay quarterly.

Not sure if you have to pay? You can figure it out by consulting the IRS web site at http://www.irs.gov/publications/p505/ch02.html

Need to know more? …continue reading Do You File Estimated Taxes? Fourth Quarter 2009 Return is Due

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As independent contractors, mystery shoppers get to deduct reasonable and necessary business expenses. That can mean anything from pens and notepads to ink and toner, cell phones, computers and other supplies and equipment. Tax deductions can also include educational expenses, such as books and courses.

You should never purchase something just because the expense can be deducted. Deductions reduce your taxable income, and therefore you pay less in tax, but it is not a one-for-one deduction. That means if you spend $100, you do not pay $100 less in taxes. Your “savings” may be about $25 – $50, depending on your overall income level. It is a nice savings for those necessary expenses, but buying something you do not need just to get a tax deduction doesn’t make sense.

It does make sense, however, to time your purchases to make the best use of tax deductions. If you want to reduce your taxable income for this year, you still have some time to buy things you need. For example, if you had more independent contractor income than expected this year, and want to reduce your tax bill, now is the time to stock up on some supplies, or make a purchase you have been considering, such as a laptop computer or mystery shopper certification. …continue reading Last-Minute Tax Deductions for Secret Shoppers

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In 2009, the Obama administration decided to try to stimulate the economy by giving people more money in their paychecks. The Internal Revenue Service (IRS) adjusted the schedules employers use to withhold taxes from employee pay. The idea was that with more money in their paychecks, people would spend more and that would help get the economy back on track.

Unfortunately, many of the people who got more money in their paychecks this year may find Uncle Sam waiting with his hand out when they file their taxes next year. Some may even find that they will have to pay a penalty for the underwithholding, in addition to the tax they owe.

It is estimated that 15.4 million taxpayers had too little tax withheld and will owe money to the government. So who are these taxpayers?
…continue reading Will You Owe Money to the IRS?

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If you pay quarterly estimated income taxes, your second-quarter estimated tax payment (using form 1040-ES) for 2009 is due on June 15, 2009.  Although most mystery shoppers who accept occasional mystery shopper jobs will not have to be concerned with paying quarterly estimated taxes, if a significant portion of your income is derived from secret shopping or other independent contractor activities, you may need to file quarterly tax returns.

Not sure if you have to pay? You can figure it out by consulting the IRS web site at http://www.irs.gov/publications/p505/ch02.html

Need to know more? …continue reading Quarterly Estimated Income Taxes Due

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Tax time is here again. You may have already received 1099 forms from some of the mystery shopping companies for which you worked in 2008. Here are some frequently asked questions about 1099s and what you will need to know to file your income tax return.

Will I get a 1099 from every mystery shopping company I did work for in 2008?
You will not necessarily receive a 1099 from every company for which you mystery shopped. Companies are required to provide a 1099 if they paid you at least $600 over the course of the year. Some companies include all payments they made to you when calculating the $600 threshold, and others exclude amounts paid for reimbursements and other expenses. …continue reading 1099 Forms for Mystery Shoppers

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If you pay quarterly estimated income taxes, remember that your fourth-quarter estimated tax payment (using form 1040-ES) for 2008 is due on January15, 2009. You may delay making this payment until Jan. 31 if you file your 2008 return (Form 1040) and pay any tax due by February 2, 2009.

Not sure if you have to pay? You can figure it out by consulting the IRS web site at http://www.irs.gov/publications/p505/ch02.html

Need to know more? …continue reading Estimated Taxes are Due for the Fourth Quarter of 2008

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Question from a mystery shopper:

You recently wrote about doing mystery shopper jobs while traveling on vacation. I think that might be a good way to make my trips more affordable, and I also had this thought:

If I mystery shop on my vacation, may I deduct the cost of my trip from my taxes?

I am not a CPA or tax professional, so this should not be considered legal or professional advice. In fact, the best thing to do is to consult with your tax professional to get his or her opinion. However, here are some portions of the tax code that seem to apply to this question.

…continue reading May I Deduct My Vacation Costs if I Mystery Shop on the Trip?

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