I realize the deal with reimbursements and actual pay but I have a couple of examples that I would like to know the way it is handled.

1) The donut shop that pays $15 but you have to order a dozen and a drink - for this would I count the $9.xx as expenses and the remainder as income?

2) Same thing for the grocery store that states you must buy 5 items but you don't get a reimbursement. Do I count the 5 items as expenses and the remained as income?

Thanks

They will include it as income when they send you a 1099. It's up to you to keep records of what you spent and claim it as a deduction against that income on your tax return.

Question 2 seems really problematic, since you can easily buy 5 items that cover the entire 'fee'.

I agree Ishmael. One item is chosen and the other 4 can be anything.

jpgilham Wrote:
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> They will include it as income when they send you
> a 1099. It's up to you to keep records of what
> you spent and claim it as a deduction against that
> income on your tax return.


But many of us shoppers will not be receiving a 1099 from these MSCs unless we made over $599.00. And the OP's question has always been my dilemma. And I keep excellent records using the MS Bible program.

Let me give specific examples...

1) Gas Station
Shop Fee - $10.00
Required but NON-REIMBURSED purchase - $1.00 (no $ amount is specified but you HAVE to buy something; I bought a lottery ticket.)
I record the $10.00 in my Shop Fee column in Excel. I leave the Reimbursement Amount column blank. I put the $1.00 in the Purchase Amount column. Total To Be Paid column is $10.00.

So, is my earned income $10.00? Or $9.00?

2) Grocery Store A
Shop Fee - $8.00
Required but REIMBURSED purchase - up to $10.00 (you can spend more or less but the max reimbursement is $10.00.)
Amount Spent - $6.32
I record the $8.00 in my Shop Fee column in Excel. I record the $10.00 in my Reimbursement Amount column. I record the $6.32 in the Purchase Amount column. Total To Be Paid column is $14.32.

So, is my earned income $14.32? Or $8.00?

3) Grocery Store B
Shop Fee - $12.00
Required but REIMBURSED purchase - up to $10.00 (you can spend more or less but the max reimbursement is $10.00.)
Amount Spent - $11.72
I record the $12.00 in my Shop Fee column in Excel. I record the $10.00 in my Reimbursement Amount column. I record the $11.72 in the Purchase Amount column. Total To Be Paid column is $22.00.

So, is my earned income $22.00? Or $12.00? What happens to the extra $1.72 that I spent over the allowed reimbursement? I just eat it? That is literally and figuratively since this was a grocery store shop. :-)

4) Casual Dining Restaurant
Shop Fee - $25.00 (This is a FLAT FEE.)
Required but NON-REIMBURSED purchase - $0.00 (Again, this is a FLAT FEE shop.)
Amount Spent - $23.93
I record the $25.00 in my Shop Fee column in Excel. I record $0.00 in my Reimbursement Amount column. I record the $23.93 in the Purchase Amount column. Total To Be Paid column is $25.00.

So, is my earned income $25.00? Or $1.07 ($25.00 - $23.93?)

I think that is a good variety of examples. Again, I have everything recorded in Excel but if I am inputting the amounts in the wrong columns, it will throw off my taxes.

Ok, I'm here. A little about me before I go into this. I am not a tax person. I have, since high school, been in business classes (payroll, accounting, blah, blah) have filed my own taxes for my own businesses since 1995 (Ebay) including mystery shopping for the past 3 years. I have an associates in Criminal Justice (working on my bachelors and hope to gain my masters after that) and my concentration is in forensic accounting.

That being said I can not tell you what to do or how to do it I can only share what I do. If you want actual advice that is going to get you backed during an audit, go to a professional, even better... snag a tax shop and get it paid for. The benefits of having a tax professional behind you is if you do get audited, they will help.

I count everything that is required for payment of a job as income. Here is where it gets tricky. My spread sheet has the 2
columns (fee and reimbursement) but I also have 3 expense columns. And I will try my best to explain to you why.

Fee and reimbursement (we all have a pretty good idea of what these are) if the fee is $0 and reimbursement is $40 and I spend $32.78 then $32.78 goes into the reimbursement column. If I spend $41.78 then $40 goes into the reimbursement and $1.78 goes into FOOD EXPENSE. Same with those grocery shops that only have reimbursement... $10.50 goes into the reimbursement column and the extra goes into FOOD EXPENSE. Now the clothing I bought to "fit in" with the environment (high end restaurant), this is a BUSINESS EXPENSE.

So FEE $0 REIMBURSEMENT $40 FOOD EXPENSE $1.78 and BUSINESS EXPENSE $50 (for the dress). The last expense column is anything vehicle related. Yes, I separate EVERYTHING.

I staple the job sheet (first page that shows the fee, reimbursement and requirements of food order) these are HARD PAPER COPIES and put it in a file chronologically with the other jobs for the month. In that same hard copy file I make a copy of the dress receipt and couple that with another copy of the job sheet. This is also the file that I put my gas receipts and any other expenses (pens, paper, computer purchase, tolls, parking, car maintenance and don't forget ATM fees (yes they are deductible)... whatever/everything.) I print a hard copy of my spread sheet and payment invoices, placing those into the same file for the month. So 2 files, one within another. One for jobs and one for expenses.

This seems like a ton of work but when you get called in for an audit... It's an easy month by month of hard copy evidence that, in fact, these deductions were taken in the commission of a job and if there is a question... the requirements are right there for an easy 2 second answer. Your auditor will love it and so will you when you are sweating it out. By the time you get to March of the audit year, your auditor will "get it" and you will breeze through the rest. Top it off with a spread sheet total for the year and your 1099's to match everything that you have on your tax form and it's "Thank you very much, your audit is complete, have a nice day!!!"

I also keep hand written records and these are what I hold as the audit is being done.

My best advice, most of us are going to be claiming MORE than the amount of our 1099's (those companies you didn't make over $599) so don't sweat the audit. Keep good records and keep them strictly organized. It may seem like a pain in the azz now but you will be patting yourself on the back by the time your audit is over. Another little tid bit... when they ask "did you start this business in (current tax year)" you check yes and it is the biggest flag for audits. Expect it! I have started 5 businesses in 18 years, 3 of which I still run, and every 1st year I get audited, Mystery shopping was the most record keeping and the only time I requested an "in person audit" and if I were to be audited again on this business I would opt for the same type of audit.

Just remember, do not double deduct... separate the reimbursement from the overages, the gas example again, reimbursement is $2 but you bought $5, the $2 goes to the reimbursement and $3 goes to gas, same with the tax prepare fees. If it is a shop and you got reimbursed for it DO NOT put it in the allotted spot for tax prep fees on your return. The second the auditor finds a mistake or finds that you double deducted something just upped your audit hours of time.

So that is just me... it's a lot I know and if anyone needs clarification I will try to clarify, post it here as it will give others the chance to input as well... the Quicken program suggestion by LisaSTL in the other post was right on for the kinds of programs that are out there to help.

Thanks, Kathee70. I actually printed this thread out so I can reread it when I am not so tired. One quick question off the top of my head. How do you print from Excel? Every time I try to print out a spread sheet, it prints out real small and cuts off on the right hand side and continues on to another page and leaves a lot of blank spaces on the paper. It is very annoying and not useful at all since I can't even read the figures.

Shop2LiveinFL Wrote:
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> Thanks, Kathee70. I actually printed this thread
> out so I can reread it when I am not so tired.
> One quick question off the top of my head. How do
> you print from Excel? Every time I try to print
> out a spread sheet, it prints out real small and
> cuts off on the right hand side and continues on
> to another page and leaves a lot of blank spaces
> on the paper. It is very annoying and not useful
> at all since I can't even read the figures.


If it's printing really small your page setup may be set to print less than 100%. Go to File Page Setup - on the page tab make sure it's set at 100% page size. Then the rest sounds like your page margins are not set right. You can go to View and then Page Break Preview.

You can also do a "save as" and select PDF this will, well, save it as a PDF and then you can print preview and edit the image from there.

Shop2Live in your examples and I won't go over each one, but if you are required to make a purchase but there is no stated reimbursement for it then they will include it as income and then you must deduct on your taxes what you paid. So if it is like the grocery store where you're paid $14 but you have to purchase 5 items then they will include the entire $14 on your 1099 of it there is not one then you must declare the entire $14 as income and then deduct off as an unreimbursed expense in your expenses what you spent on the groceries.

If they say that it is $14 plus a $5 reimbursement then you just declare the $14 and don't deduct off the $5 as an expense. Unless the required purchase came to more than $5 (say $5.60) and then you would deduct off the .60 as unreimbursed expenses

This all looks like another way MSCs exploit shoppers. Of course I realize as shoppers we are not bound to accept shops where purchases are required. These are what I prefer since I dislike waiting to be repaid anyway.

I'm sorry, but a lot of this doesn't sound right to me. Here's what I do with a grocery shop. Fee $10.00, reimbursement for required purchase $6.00, actually purchased $32.79. Total gross income from this venture is in my records at $10 plus $6. I add up all gross income, then add up all required reimbursed purchases up to the amount of the reimbursement, subtract the required reimbursements from the total gross income, and I have net income after reimbursements ($10). Then I subtract all legal deductions and that is my taxable income. The fact that I spent $32.79 is not relevant.

I do not deduct the price of clothing bought for my work because I can use it for other purposes. Deductible clothing is normally considered anything that cannot be worn for non working purposes such as a uniform with logo. I do not mind if someone else deducts for clothing and it is not my business, but I don't do it.

If I go over on the required purchase, I don't take a deduction for that either. It was my choice to spend more. I don't mind how you do your records. I'm just saying how I do mine.

@ MDavisnowell ~ Is your post directed towards me and my calculations not being right? Which is probably the truth. Or are you saying that one of the other posters calculations does not sound right to you?

All I know is that I went to a "professional" last tax season but he did not understand this business at all. He would not let me deduct my mileage since I use my car for my FT job also. But I have totally separate mileage logs for FT job and MS'ing job. If anything, I am probably owed more money.

I'm not sure how issuing a 1099 containing everything paid is exploiting shoppers. My first couple of years MSing were very part time, like one company and probably less than $600. Back in those days there were few purchase requirements so most if not all of my income was from fees. I had no idea anything could be deducted so it was just added into my income from my day job. Was that the mystery shopping company's fault or mine?

Shop2, first of all, I'd file an amended return for last year and claim that mileage and all my other expenses. A lot of tax "professionals" don't have the knowledge they should. Many are excellent. It's best to learn how to do your taxes yourself to the extent you can tell when your tax guy or gal is competent.

I'm not saying you're doing anything wrong, and at the same time I'm saying it could be none of us really know how to do this. It may not have been addressed completely in IRS regs. For example, I subtract my required purchases (reimbursements) as an expense, and this may or may not be right. Of course, these items ARE required, but still it is a form of income. If I get $10 in reimbursed groceries or other goodies, is that not income and should I not pay taxes on it? That is THE question. What I do now is subtract my required purchases as an expense and essentially that is tax free income because of the way I do it. Is there such a thing as tax free income? In the absence of anything that is definitive on how to do this, I subtract reimbursements from gross income as an expense, but I don't know that I'm correct. See what I mean? I have a set way I do this that so far has worked.

I think if I spend more than the reimbursed amount, the additional expenditure does not affect the reporting for my business. Additional expenditures above and beyond the amount required do not affect the bottom line. If I spend less than the allowed reimbursement then I enter and subtract the lesser figure. Say the reimbursement limit is $10 and I spend $4.89. The number that goes in the reimbursements received column is $4.89. The $10 offered is not relevant unless I spend at least $10.

My gut feeling on this is that if the IRS ever looks at it closely, they MAY tell us we owe income tax on the reimbursements received. When I was at H&R Block, the enrolled agent who taught our classes told us if we think we have a one in three chance to argue a deduction before the IRS and win, we should take the deduction for the client. I think I have a one in three chance (that's about right) to argue for the way I do this and win. I think there's a two out of three chance I'm on the wrong track.

When a shop has a required purchase you will not be paid if you fail to make the purchase because you have not successfully completed the shop requirements. (Yes, I know, there are circumstances when a shop will be accepted when no purchase was made because of mitigating circumstances, but your contract requires the purchase.) That makes the cost of the purchase a cost of doing business as a mystery shopper and thus a legitimate business expense.

Whether the reimbursement is useful to you or not is totally and completely irrelevant.

For fee plus reimbursement shops you will most frequently get a payment for $X which includes both the fee and the reimbursement. It is up to you to keep records as to what part of that payment is income and what part is business expense.

For fee only shops with a purchase requirement ultimately you need to do the same thing, but this is most frequently accomplished on your tax return through a category I create on my return that I title ‘unreimbursed business expenses’.

Let’s look at examples of the fee plus reimbursement:

I do a shop with a $15 fee and an ‘up to $5 reimbursement’. I go into the store and find a $4.50 item. I am sent a payment of $19.50 and my taxable fee is $15 of that. The $4.50 is a reimbursed business expense.

I do a shop with a $15 fee and an ‘up to $5 reimbursement’. I go into the store and find I could waste my money on a $5 item or spend $8 and get something I could actually use. I am sent a payment of $20 and $15 is my taxable fee, $5 is my reimbursed business expense (I could have bought something for $5 or less) and $3 is my personal expense and irrelevant to the entire process.

I do a shop with a $15 fee and an ‘up to $5 reimbursement’. I go into the store and find that there is nothing in the store for under $7.50 (no, I did not check every single item, but after reasonable search, $7.50 was the cheapest I could find). I am sent $20 and $15 is my taxable fee and $7.50 is my business expense. On my records I generally show $5 as reimbursed business expense and $2.50 as unreimbursed business expense.

As a general rule with reimbursements, I try to ‘leave no money on the table’. So I am more likely to incur some small amount of personal expense in order to use the total reimbursement. Thus a grocery shop paying $8 fee and ‘up to $10 reimbursement’ may readily have $15 or more in grocery purchases I can use but only $10 of the $18 payment I receive will be a reimbursed business expense. The remainder of my purchase is all a personal expense.

On the fee only shops (‘flat fee shops’) I am paid a fee but have a purchase requirement. Most of such shops I have performed tell me that I am to purchase ‘at least ____’. This provides a nice open door for me because I work on the assumption that I can justify spending most of the flat fee and call it a business expense. So let’s say I am doing a flat fee gas station at $20. Let’s say that I have an ‘at least $5 at the pump plus an inside purchase’ requirement. I am very comfortable with putting $10 in the gas tank and making a small snack purchase inside. Thus my receipts show a total expense of $11.79. When my $20 payment comes in I will show $20 in taxable fee but $11.79 in unreimbursed business expense.

I find it very valuable to make notes on my spreadsheet of what I have decided to do in odd instances and reimbursement, unreimbursed expense and personal expense are determined when I update my sheet after submitting a shop report.

Business like, systematic record keeping will serve you well at tax time as well as giving you some notion as to whether mystery shopping is a productive use of your time. And of course well annotated records will help you remember how you handled specific situations should you ever be audited.

Welcome Back Flash. We missed you!!! Come back and post more often.

Ok first time Schedule C user. Where on Schdeule C (line item) do I put the "Reimbursed business expenses included in income"?

Thanks

In the "Other expenses" make it a write in line item expense.

Does anyone know if a Medicare supplement can be decucted? I know Medicare and Part D are, even if I don't itemize. I read an article on MSN that said the supplement was deductible.

There is a place on the tax form to enter health insurance costs for self-employed. There is then some calculation of how much will be deducted. All of you health insurance cost for yourself go into that calculation, whether the costs are for Medicare or for nonMedicare coverage. turbotax handles this very nicely by asking you about it and putting the amounts into the right blank.

Thanks. I use Turbo tax and the supplement is on my husband, but I used our Medicare and his Part D.
I didn't know about the supplement. That is about 2500 a year. More this year, it went up $17 dollars per month for 2014.

Well, if you are the one with self-employment income, you cannot use you husband,s insurance premium, Medicare or not, as business write off for health insurance, I'm pretty sure. His health ins costs would go on the itemized deductions on schedule A, I think!!!

Thanks Walesmaven. That is what I was thinking, too.

Thanks for the info on the 1099 putting it as an "other expense". I will add it and label it "Reimbursed business expenses included in income".

Hey guys, I've been reading through various threads and I don't see anything that specifically addresses my particular question (feel free to point me in the correct direction):

If you do a dining shop, and it has a $150 reimbursement, but you spend more than that, can you deduct 50% of the overage or all of it or any of it as a business expense? I've been reading through this [www.irs.gov], and it seems murky. And of course, there's nothing that fits our situation exactly, but if I'm doing a dining shop, I am literally doing business the whole time and someone's there with me. Let's add to this senario that it is difficult to come in under or at the reimbursement given the ordering requirements (but even if that's not true, could you deduct some of that overage expense?)

Anyway, what does everyone else do?

See my response to you in the other thread. Be aware that 50% rule does NOT apply to restaurant shops which are contract work but rather to entertaining. If you are a paper salesman out on the road and take a client to lunch, then you need to consider the 50% stuff.

So you're saying I should become a paper salesman, take a client to lunch at a place I'm also shopping, and then I can claim 50% on the overage?

Done and done!