The Mystery Shopper’s Manual

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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The following is provided as general information about Independent Contractors. It is not legal advice. If you require legal advice, you are encouraged to consult an attorney knowledgeable in this aspect of the law.

As secret shoppers, we typically work as Independent Contractors (ICs), not employees.

There is not a single factor or test that determines whether a worker is an employee or an IC. Saying that someone is an Independent Contractor does not necessarily make it so. There are several things that regulatory agencies, such as the Internal Revenue Service and state tax departments, consider when determining is someone is an employee or an IC. The rules are often vague, and interpretation is up to the agency making the determination.

The IC relationship is spelled out in the Independent Contractor Agreements (ICA) between mystery shoppers and mystery shopping companies. These agreements define the rights and responsibilities of both parties. ICAs often include language relating to the factors regulatory agencies consider when determining if someone is an employee or an IC.

So what does it mean to be an Independent Contractor?

…continue reading What is an Independent Contractor?

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Making more money is nice, whether you do it through getting more mystery shopper jobs or higher-paying assignments. However, it is possible to be more profitable without earning any more money.

How? Well, as a CPA friend of mine says, “It’s not how much you make, it’s how much you keep.” Here are some suggestions to help you keep more of what you make as a secret shopper.

Maximize tax deductions. You can deduct reasonable and necessary expenses incurred in the process of running your business. These may include:

• Computer and Internet expenses;
• Office supplies (including paper, ink, toner, etc.);
• Cell phone service;
• Mileage or automobile expenses;
• Training and education;
• Voice recorders, digital cameras and other technology;
• Batteries and supplies for technology;
• A home office; and
• Other costs.

…continue reading It’s Not How Much You Make, It’s How Much You Keep

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If you pay quarterly estimated income taxes, remember that your third-quarter estimated tax payment (using form 1040-ES) for 2008 is due on September 15, 2008. Not sure if this applies to you? Here’s what you need to know. …continue reading Estimated Income Tax Payment Due September 15, 2008

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