Ever feel like you have to be Einstein to understand the tax system? Apparently even he felt as bewildered as you do.
For some, it is fairly straightforward and easy. But for those who are entrepreneurial and venture into various work adventures, it can seem like another job.
No matter how you feel about the system, it is each citizen’s obligation to report their earnings for last year by April 15 (or April 18, 2017). Then legally take whatever deductions and exclusions are available for their situation.
As a mystery shopper and small business owner, there are several ways to decrease your tax burden and possibly even get a refund!
Why Did I Get a 1099?
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.
If you are getting a 1099 from Market Viewpoint, you would have received it in the last week of January.
First time mystery shoppers are sometimes surprised when they receive their 1099. Some even begin to second guess if it makes sense to mystery shop. We’ve had shoppers ask, “After taxes, am I really making any money?”
You can earn significant income if you keep careful track of your income (even under $600), expenses and deductions allowed for self-employed or independent contractors.
As an Independent Contractor, you are running a home-based business. You are eligible to take certain deductions on your 1040 that will reduce the amount of tax you need to pay on your income.
The Top 5 Tax Deductions for Mystery Shoppers
- Office space in your home. The area where you search for shops, print off materials and write your reports is your home office. When used exclusively for your shops, the square footage is considered your office space.
- Mileage to and from mystery shops. Or cost of public transportation. Check out this list of apps Fit Small Business.com recommends to help with mileage tracking
- Cost of your computer, printer and other technology used to search for, conduct and submit your reports
- A percentage of your home heating and cooling, electricity and internet bills can be considered for tax deduction. (The percentage is related to the size of your office space).
- Your phone bill. When used for business purposes, a percentage of your bill can be considered a business expense.
Click to see other deductions deemed allowable by the IRS for home based businesses.
Keep track of expenses. Understand which expenses can be deducted and their limits. You can significantly offset the amount of tax you owe on monies you earned from your mystery shopping.
Depending on other income and tax-related factors, some mystery shoppers may not 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.
Always speak to a tax accountant on these matters. A qualified advisor can tell you exactly what is and what is not allowed to be deducted and how you can maximize your return.
With careful record keeping and a good tax advisor, you may feel smarter than Einstein when it comes to taxes!
Let us know ways you have found to make tax time and mystery shopping work for you. Please share with others in the comment section below!
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