As a mystery shopper, you are a self-employed independent contractor. You may work for as many mystery shopping provider companies as you wish. Since you are an independent contractor, you may be able to take tax deductions for secret shopping. This will be possible if you treat your shopping as a business and not just a hobby. This involves doing it regularly and keeping good records for tax purposes.
You will need to record when and where you do your mystery shopping and what your income and expenses are. You will need to save receipts and copies of reports you fill out and correspondence with the companies which give you shopping assignments. That way, if you are ever audited, you will have the proof you need to substantiate that your tax deductions were business related.
The information presented here is simply to stimulate ideas that you can use as you plan what you can deduct. It is not official tax advice. Obviously you should consult a tax adviser or accountant before taking deductions. You may also consult J.K. Lasser’s 1001 Deductions and Tax Breaks 2010: Your Complete Guide to Everything Deductible.
Travel Tax Deductions for Your Secret Shopping Business
Many mystery shoppers are not aware of all the travel tax deductions that they can take. By keeping accurate records, you may claim business deductions that are related to your secret shopping assignments. It is important to keep an auto log book (or an electronic device to record and keep your auto logs) in your car to record your mileage for both personal and business travel. That way, when you do your taxes, you will have the information you need to claim mileage. Anytime you drive to evaluate a business, you should record your starting and ending mileage reading on your odometer.
If you incur expenses for parking or tolls while you are out on business, keep those receipts. It is good to also save your gas receipts as a back-up, even it you are claiming a mileage deduction instead of an actual expense deduction.
If you are out on the road for several hours doing secret shopping assignments, you may also be able to deduct the cost of a meal in a restaurant. Of course, it would be even better to get a free meal by doing a restaurant mystery shop!
With smart planning ahead, you can combine trips for running errands with your mystery shopping trips, taking advantage of your opportunity to claim business mileage. For instance, if you need to take clothing to be dry cleaned, choose a dry cleaning business that is near one of your secret shopping assignments. Drop off your clothing while you are there. This will save you time and give you the opportunity to use tax deductible mileage for something you would have had to do anyhow.
If you land an assignment at a movie theater. Take a friend along, enjoy the movie, and take a mileage deduction in the process. What a great way to turn a trip out for entertainment into a travel tax deduction!
Tax Deductions for Supplies and Services
You can claim tax deductions for supplies and services that you use in your business. Keep receipts for pens, notebooks, ink cartridges, auto record log books, day planners, calendars, and anything else that is used for business. Also record how and when you used them.
You may want to set up a business bank account so that it will be easier to keep track of your business income and expenses. If you are charged bank fees or fees for your checks, these should be deductible also.
You will need to use your computer to log onto company websites to sign up for your mystery shopping job assignments. Also you’ll be using email and filling out online forms to report your findings as you do your mystery shopping. Consider what percentage of the time that you spend on your computer and on the internet that is related to your mystery shopping business. Keep records to substantiate this so that you can deduct a portion of the cost of your computer and a portion of your monthly internet service fees.
You may also need to use your phone or cell phone to call the businesses that you will be investigating. Some mystery shopping assignments include a report on how the business handled your call. Also you may need to call the companies that assign you to secret shopping jobs. If you keep track of the amount of time you use your phones for business versus personal use, you may figure a percentage and claim that percentage of your monthly phone bills.
Think about what supplies and services you use in your business? Don’t miss tax deductions for supplies and services that you use.
You may need software for keeping track of your expenses and income. Also you may need tax software. If you are using these to keep track of your business income and to do your taxes, which include your business income and deductions, then the cost of such software is deductible.
Tax Deductible Vacations?
Once you establish yourself as a reliable mystery shopper, the companies you work for should be willing to give you frequent assignments. When planning a vacation, you can log onto their websites to find out what assignments are available in the areas where you will be traveling.
If you plan your trip so that you can spend a few hours each day doing mystery shops, you could claim some of your vacation expenses as a business expenses. This is especially helpful when you can claim mileage as you travel from where you live to various assignments in different locations. Some of your meals may be deductible also.