It is that time of year again. Time to pull together all of the records of what we did last year so we can file our tax returns. Here are some tips to help you save time and money when paying your income taxes.
Most of the time, secret shoppers are classified as independent contractors, not employees. That means that we declare our income on a Schedule C filed along with the 1040 form. Do not list your independent contractor income as “wages” on your tax form.
Be sure you declare all of your income, even if you did not receive a 1099 from the mystery shopping company. You will only receive 1099s from those companies that paid you at least $600; however, the money you earned is taxable, even if you did not get a 1099.
Take every legitimate deduction. As independent contractors, mystery shoppers get to deduct the reasonable and necessary costs of doing business. Deductions may include things such as mileage or car expenses, computer and internet expenses, telephone and cell phone charges, supplies (such as paper and toner), equipment (e.g, digital voice recorder, camera, stopwatch, et al), education (e.g., MSPA certification, a grammar workshop, etc.), and even a home office. These deductions are taken on the Schedule C form.
Required purchases are generally deductible as expenses. Consult your tax preparer for more information.
Hiring a tax preparer can be a good idea. They keep up with the IRS regulations and should be able to keep you from overpaying (or underpaying) taxes.
To make tax time go smoothly, keep good records. Keep a mileage log in your car and record the date, distance and business purpose of your trips. Take an envelope with you on mystery shopping trips and drop all of your receipts and other documentation into it.
You do not need a receipt for every expense. Small expenses do not require a receipt, so take the deduction even if you do not have a receipt. But get receipts whenever you can. See IRS Publication 463.
The first estimated tax payment for 2008 is due on April 15, 2008. To learn if you need to file quarterly estimated taxes, go to http://www.irs.gov/faqs/faq9.html
Should I get a small business liscense to account for my secret shopping income? I’m in California and have an income of about $30 per month.
It depends on the law in your jurisdiction, usually by city or county. Call your local government to ask.
Although most places will not require that you get a business license, some may.