Tax Deductible Expenses
for Mystery Shoppers
Keeping track of tax deductible expenses for mystery shoppers is an important part of treating mystery shopping like a business. You may earn money from an assignment, but you may also spend money driving to the location, purchasing supplies, traveling, or operating your business.
I'm not a tax professional, so I turned to someone who is. I interviewed Suzette Plumb-Trevino, a tax professional who prepared my taxes for many years. Her advice reinforced something I've learned from mystery shopping: good recordkeeping makes tax time much easier.
Tax laws can change, so always check current IRS information or consult a qualified tax professional about your own situation.
Want more help getting started? My book, Take That Job And Mystery Shop It!, walks you through finding assignments, completing shops, writing reports, and avoiding many of the mistakes new shoppers make.
Keep Records of Your Income and Expenses
I used a simple spreadsheet to keep track of my mystery shopping business.
My spreadsheet included the location of the assignment, round-trip business miles, the amount I spent, the amount I earned, and the date I was paid. I also kept my receipts.
I used a simple spreadsheet to keep track of my mystery shopping business.
My spreadsheet included the location of the assignment, round-trip business miles, the amount I spent, the amount I earned, and the date I was paid. I also kept my receipts.
Your system doesn't have to be complicated.
The important thing is having records that clearly show your business income and expenses. Don't depend on your memory several months later.
Keep records as you go.
Consider a Separate Business Account
Another suggestion Plumb-Trevino gave me was to use a separate bank account for the business.
This can make it much easier to see what you earned and what you spent. It also helps prevent business and personal transactions from becoming mixed together.
A separate account doesn't automatically make an expense deductible. The expense still has to qualify as a legitimate business expense. But good organization can make recordkeeping much easier.
Tax Deductible Expenses for Mystery Shoppers Can Include Mileage
Driving can be one of the largest expenses for an active mystery shopper.
I've driven considerable distances for assignments, especially when combining several shops into a route.
The IRS provides an optional standard mileage rate for qualifying business use of a vehicle. The rate can change, so rather than putting a specific mileage rate here that may become outdated, I recommend checking the current IRS rate when preparing your taxes.
Learn more about mileage use from the IRS.
Another option may be calculating the business portion of your actual vehicle expenses. The rules governing the two methods are different, so make sure you understand which method you're using.
Whatever method applies to you, keep good mileage records.
Record where you went, the business purpose of the trip, the date, and the business miles driven.
Don't Confuse Reimbursements with Expenses
Mystery shopping assignments can be structured differently.
A company might pay a shopper a fee, reimburse an authorized purchase, provide a travel allowance, or use some combination of these.
Don't automatically assume that every dollar you spend is an additional deduction.
For example, I've completed assignments where mystery shopping companies provided money toward travel or meals. How reimbursements, allowances, income and related expenses are treated can depend on the circumstances.
Keep records showing what you spent and what the mystery shopping company paid or reimbursed. Let your tax professional determine the proper tax treatment when you're uncertain.
Travel and Meals Have Special Rules
Mystery shoppers sometimes travel to other cities and combine several assignments into one trip. This is often called route shopping.
Business travel may involve transportation, lodging and other expenses. Meals have additional rules and limitations.
Don't assume that buying lunch while you're out mystery shopping automatically makes the meal deductible.
The IRS generally treats qualifying business travel meals differently from an ordinary meal purchased while working locally. Business travel generally requires being away from your tax home substantially longer than an ordinary day's work and needing sleep or rest to meet the demands of the work.
Qualifying business meals are also generally subject to a percentage limitation.
Because travel situations can become complicated—especially when a trip combines business and personal activities—this is an area where professional tax advice can be valuable.
Other Possible Business Expenses
Depending on how you conduct your mystery shopping business, other ordinary and necessary business expenses may qualify.
Examples could include certain office supplies, postage, business-related software or services, professional fees, and equipment used for the business. If something is used for both business and personal purposes, special rules may apply to determine the deductible business portion.
Some self-employed people may also qualify for a home-office deduction, but there are specific requirements. Simply writing reports at your kitchen table doesn't necessarily make part of your home deductible.
Keep documentation for expenses you believe are business related and discuss questionable items with your tax professional.
Schedule C and Your Mystery Shopping Business
Self-employed individuals commonly use Schedule C, Profit or Loss From Business, to report business income and allowable expenses.
Schedule C includes categories for many common business expenses and also provides a place for other qualifying business expenses.
Your records are what allow you to complete the form accurately.
Don't try to force a legitimate expense into an incorrect category just because you can't immediately find the right place for it. If you're uncertain about where something belongs—or whether it qualifies at all—ask a tax professional.
Learn the IRS Schedule C and instructions.
Keep Your Tax Records Organized
One of the best habits you can develop is recording expenses when they occur.
Save receipts and supporting documentation. Keep track of the income you receive from mystery shopping companies. Maintain your mileage records. Keep information about reimbursements and other payments.
The IRS requires taxpayers to be able to substantiate deductions, and good records make that much easier.
One More Thing
Mystery shopping can be enjoyable, but when you're being paid to perform assignments, there's a business side to it as well.
Keeping accurate records throughout the year is much easier than trying to reconstruct everything at tax time.
I've always believed it's worth consulting a qualified tax professional when you're uncertain about a deduction. Tax rules change, and everyone's circumstances are different.
Understanding tax deductible expenses for mystery shoppers isn't about finding every possible write-off. It's about accurately reporting your business income and claiming legitimate business expenses that you can support with good records.
About the Author
I'm Mystery Don (Donald J. Servais, Jr.), and I've completed mystery shopping assignments for restaurants, hotels, apartment communities, automobile dealerships, new-home builders, and other businesses.
I created MystShopper.com to share what I've learned from my own experiences, help new shoppers avoid common mistakes, and explain how legitimate mystery shopping really works.
I'm also the author of Take That Job And Mystery Shop It!, which includes beginner-friendly advice, real-world mystery shopping experiences, and a directory of more than 150 mystery shopping companies.
Drawing on my 45-year career in television, I've also written 7 Keys to Success in a Changing Television Industry, a guide for people interested in building a career in television and video.
My goal is simple: honest guidance without the hype.
We're always looking for new faces to visit different places.
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