We all prefer turning to Page 2 on IRS 1040 form and see the entry on Line 75 – REFUND OWED TO YOU! How we smile!
But from time to time, Line 78 get filled in – AMOUNT YOU OWE – and our hearts sink.
As a mystery shopper, if you earn over $600 in a year with any one mystery shopping company, you will receive a 1099 from that company – it’s the law.
Some first-time mystery shoppers are surprised by this, and even begin to second-guess if it makes sense to mystery shop: “After taxes, am I really making any money?”
You can earn significant income if you are aware of what you can deduct on your tax return.
As an independent contractor, you are running a home-based business and are eligible to take certain deductions on your 1040 that will almost guarantee you will not be writing a big fat check to the IRS (although you may still have to write a little one!).
- Do you have a small office or area in your kitchen that you use as office space to look and apply for shops, to print out materials needed for your mystery shop assignments, and where you ultimately sit to submit your reports?
- Do you drive or take public transportation to your mystery shopping assignments?
- Do you use a computer and printer to conduct your mystery shopping business interactions?
- Do you heat your home and use your phone to make mystery shopping appointments?
If you are nodding your head, then you are eligible for home office deductions, mileage expenses (where not reimbursed), transportation costs, cost of office supplies and various other deductions deemed allowable by the IRS.
Keeping track of these expenses and knowing which are allowed and their limits can significantly offset the amount of tax you would owe on monies you earned from your mystery shopping. For some people, depending on a number of other income and tax-related factors, you won’t have to pay taxes on the mystery shopping money you have earned.
These are legitimate IRS deductions and regulations. These are not ways to trick the system or find a loophole. We are not suggesting anything that any independent contractor is not eligible to do.
We always advise that you speak to a tax accountant on these matters. A qualified advisor can tell you exactly what is and
is not allowed to be deducted and how you can maximize your return.
With careful record keeping and a good tax advisor, hopefully you will be seeing the REFUND OWED TO YOU line filled in on your tax form!