Well, it’s that time again. By now you should have received 1099s from any mystery shopping companies that paid you more than $600 last year. Every year I get questions from secret shoppers about 1099s, so here are the answers to some of the questions I receive most often.
I recently got an email from a shopper that said in part:
If you are careful not to go over making $500 per company you’ll never have to pay a penny for taxes. By taking enough jobs to make $500 from 30 or 40 companies you can make an extra $20,000 a year, tax free. Who couldn’t use an extra 20 grand, especially tax free?
Wow. There is so much wrong here I hardly know where to begin.
You should have received all of your 1099s from mystery shopping companies but remember that (1) you can file your return without any 1099s as you are not required to send 1099s with your tax return and (2) even if you don’t get a 1099 you still must report your income.
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.
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 http://www.mspa-na.org/certification.Continue Reading
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?
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