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?
Some of the characteristics of Independent Contractor relationships are that ICs typically:
- Market their services to the public, or to a number of clients
- Are free to take on the clients and projects they choose
- Get paid by the project, not by the hour
- Provide their own tools and materials
- Are responsible for their own expenses
Additionally, ICs retain control of their work. They choose the clients and assignments they will accept. Although the client can require specific results and impose deadlines on the IC, the IC decides when and how to complete the work.
Companies do not provide Workers Compensation or Unemployment Insurance for ICs. Nor do they withhold income taxes or pay the employer portion of Social Security and Medicare taxes for ICs.
Because they are not considered employees, ICs have all the tax advantages of any other small business. That means that they can deduct reasonable and necessary costs of doing business, such as car expenses, equipment and supply purchases, Internet access, and other expenses, including a home office. This can be a tremendous advantage to Independent Contractors, often outweighing the loss of benefits such as Unemployment Insurance.
Being an Independent Contractor–with the flexibility to work when and where you wish, and with whomever you wish–has many advantages over traditional employment relationships for those people who like having complete control over their work.
I took your internet coarse and since I’m a new shopper it was a big help to me.
If we are considered IC’s than do we need to have a buisness license?
Cathy Stucker says
In most places a business license is not required; however, you may want to check with local authorities to determine the laws in your city or county.
i have a situation. i used to mystery shop all over chicago and suburbs. i few times i gone out of state. now i am live on a reservation in south dakota and there are virtually no shops. i am bored out of my mind.
how and where do i get shops?
since i did not work due to locale do i claim anything on taxes as a independant contctor as a lose of business?
Cathy Stucker says
JR, mystery shoppers are very dependent on location, location, location for shops. If there are not many businesses around you getting shopped it will be hard to get assignments. If there is a larger town or city nearby, you might try putting together a route of shops and doing a bunch of shops in one trip.
To answer your other question, you can deduct actual out-of-pocket expenses against your income. You can not take a deduction just because you are getting less work that you would like.