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 Mystery Shopping, Merchandising & Demo
 Independent Contractor Taxes
 What Deductions are there without a "Home Office" ?
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LSuzanne
Apprentice

Upstate, NY
USA
4 Posts

Posted - 08/18/2003 :  3:06:57 PM  Reply  Reply with Quote
What kind of deductions can you take besides mileage if you don't have a home office? I do all of my business from home, but the computer is also used for games etc. and is also in a main living area of the house. Because of this, my office can't be considered a "home office." So, this means that you can't take deductions for office supplies (paper, ink, etc). Does this mean I can only claim mileage?

MikeSLU
Star Contributor

SE
USA
318 Posts

Posted - 08/18/2003 :  5:31:18 PM  Reply  Reply with Quote
That's why accountants and CPAs are in business.... giving tax advice. And IRS has some good websites, forms, and publications that are quite detailed on the subject; and that is free. Take the time to do a little research there. And you will find a lot of things that you can do deduction wise. Have fun.....

MSPA Silver Certification # bspa98
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Sandi In Mississippi
Star Contributor

MS
USA
1285 Posts

Posted - 08/18/2003 :  6:49:24 PM  Reply  Reply with Quote
Get a copy of Schedule C and the directions from IRS. This is where you file and account for income from a small business. If you read through the directions carefully it will give you most of what you need to know. A lot of people find it helpful to do that reading, plus look through the boards (this topic has been up several times on this board) and jot down questions as you go. Then print off a copy of what you use to keep track of your income and expenses and take it all in for one nice appointment with a reputable CPA, asking all questions at once. This is a good time of year too, as they are not busy like during tax season.

Home office deductions enable you to expense electricity, phone line, etc. But for me, it's never been worth the time working out a system to do that as we use our home office for several different business endeavors, plus pleasure. Save every receipt for office supplies and mark those which have been consumed primarily by business. Take a few moments to mark business calls and faxes on the phone bill before filing it. While mileage is the primary expense, there are any number of legitimate expenses to running this type business and if you get a system going early and are consistent about documenting them you should be able to deduct them.

MSPA Gold Shopper
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DorothyB
Contributor

Houston, TX
USA
64 Posts

Posted - 08/18/2003 :  7:45:16 PM  Reply  Reply with Quote
I've been spending a good amount of time trying to figure out exactly the same thing.

To claim office in the home, there must be "exclusive" use of the space. All that is exclusive at my house is the space where the files are stored.

I've requested clarification from the IRS on the mileage and the answer I got was just as vague (in my opinion) as the web site so I will try calling them tomorrow. I do know that you can claim mileage from the 1st shop to the next shop to the next shop. What is gray (to me) is whether you can claim mileage from your home to the first shop and from the last shop to your home. I could argue it both ways based on things I've read at www.irs.gov

You can deduct various office supplies. I plan to deduct my ugly watch that I use to time minutes & seconds for FF shops. Postage to mail in receipts or reports would be deductible as would the expense to make copies.

As was already suggested, check out the schedule C and the instructions for schedule C as well as various other areas at the IRS website.

DorothyB / TX
MSPA Silver # zxgteb
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.Dawn DE
Inactive

DE
USA
518 Posts

Posted - 08/19/2003 :  05:51:59 AM  Reply  Reply with Quote
First, on the mileage question, as an IC you can claim every mile from when you leave home until you get back. If you were an employee of someone else and filing 2106 (for unreimbursed employee expenses), then you could only claim mileage from your place of work to other destinations. A good example is a visiting nurse, who can claim mileage from visit to visit but not back and forth from the office. The IRS considers this a commuting expense, which every employee must pay out of their own pocket. As an IC, you don't commute, you can claim it all. Examples of other business deductions (even without a home office):
Postage
A fax machine
A portion of all office equipment used even partially for the business (look at IRS rules for "listed property")
A mini tape recorder or digital camera (again, may be "listed")
MSPA fees for certification
File cabinet or box, printer paper, staples, all kinds of office supplies

The suggestion about reading the IRS guide for Schedule C is excellent. Also, Publication 334 "Tax Guide for Small Businesses" is helpful.

Dawn
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LSuzanne
Apprentice

Upstate, NY
USA
4 Posts

Posted - 08/24/2003 :  09:11:23 AM  Reply  Reply with Quote
So, I can deduct office supplies such as paper, postage, ink, etc. without a "Home Office?" Can I deduct internet usage (the part that is only business related)? I thought these things could only be deducted if I had a home office.
I did read through the archives, Schedule C, Tax guide for Small Business and Home Office publications before posting this question. In my opinion, they are vague and too broad for answering this question. Like it says at the beginning of this forum- we have tax issues that are different from everyone else. I wanted to get an idea of what other MSers deduct without having a "Home Office".

MSPA Silver Certified #ezywiw
Shopping the Southeastern suburbs of Rochester, NY
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.HaroldLP
Valued Contributor

Syracuse, IN
USA
242 Posts

Posted - 08/24/2003 :  2:19:42 PM  Visit .HaroldLP's Homepage  Reply  Reply with Quote
The only way to get a true and accurate answer for your question is to consult a tax professional. Everyones situation is different thus the only way to get a definate answer in your case is to ask your tax preparer or a CPA. The fees for it are also, in most cases, deductible. If they happen to give you wrong information they then are liable for any penalties in the event you are audited, and will normally go with you to the audit to answer questions. You don't get that service on an internet forum.
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CandiWV_
Member

Dry Creek, WV
USA
18 Posts

Posted - 08/25/2003 :  9:39:38 PM  Reply  Reply with Quote
From what I understand of the big tax book(the one with approximately a thousand pages). LOL. I read the darn thing from cover to cover one year. Yes, whatever percentage of your home that is used for filing and work is tax deductible. This includes the percentge of your internet access that is used for business. If the computer is used 20% of the time for business purposes, deduct 20% of your internet bill. The same thing applies for phone bills, electricity, and other home office expenses. Even corporations have employees who spend time answering personal emails and playing games. LOL. I have seen a few that should have been working instead of chatting. LOL. I was not working there just observing.
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CherylW
Valued Contributor

Riverview, FL
USA
197 Posts

Posted - 08/26/2003 :  3:44:51 PM  Reply  Reply with Quote
You really need to consult a tax professional. There seems to be some misleading information here. Make sure to ask them if they have experience doing Schedule C returns or business returns with a home office. Even a CPA needs to be asked. Some focus on accounting in general and do not specialize in tax returns. There are many interpretations of the tax laws and some people have more experience in certain types of tax returns than others.

You can deduct all office supplies without a home office as well as computer usage (this needs to be documented well). If you don't have a "home office" then you can't deduct utilities, rent, mortgage interest, taxes, etc. Take note that a regular home phone can never be deducted-only a second line and any long distance calls.

You should not take my word for any of this. I feel that I have interpreted the laws correctly but others may disagree. It sounds like you did a lot of research and have a good base knowledge for when tax time comes around. You should be able to call any CPA or tax preparer with questions at any time of the year for no charge.


MSPA Gold Certified
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.Dawn DE
Inactive

DE
USA
518 Posts

Posted - 09/26/2003 :  1:54:01 PM  Reply  Reply with Quote
First of all let me say that I am in no way a tax expert. Even among CPA's, professional tax preparers, and IRS agents there is a wide difference of opinion and interpretation of the law. Having said that, I agree with the advice that you should do the research and ask lots of questions of anyone that you would pay to do your taxes. I am a paid preparer for a nationally known tax service, and I recently re-certified for next season by taking a class on employee business expenses and home office deduction. My INSTRUCTOR was unsure on the mileage question (the difference's between an employee and an IC who files Schedule C). We researched it as a class and came to the conclusion that IC's can take all mileage, home to home, as opposed to employees who must deduct commuting mileage. That was our OPINION. The bottom line is you MUST feel comfortable with whatever conclusions you make or are made for you by a paid preparer, and be prepared to defend it in an audit. Even if someone else goes to an audit for you, it's your signature on the line. The only advice here I would disagree with is making a blind call to a CPA or tax prep service for free advice, especially during tax season. Let me tell you from experience that if someone calls who is not a client we will in no way open a book and research something for them. The same way a shopper won't take a low fee/reimburse only shop, a paid preparer will not exert any effort for someone who is looking for free advice , and it is unfair to expect them to take time away from a paid return to look up something for you. Most of the time a secretary answers the phone (someone who is not trained), puts you on hold, then repeats your question the best she can remember it to a preparer who is knee deep in a complicated return. The annoyed and interrupted preparer gives her a terse, half thought out answer which she only half understands to repeat back to you. If, by chance, an actual preparer answers, most will tell people whatever they want to hear just to get them off the phone so they can get back to work. As unprofessional as it sounds, without any liability for the return, they have little incentive to spend time on the phone and get a real sense of your situation. Tax preparers work on commission, much like IC's.

Dawn
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Merrl
Star Contributor

CA
USA
535 Posts

Posted - 09/27/2003 :  11:19:27 AM  Reply  Reply with Quote
Re seeking advice from a CPA, I would imagine there are very few who are familiar with mystery shopping. And it is going to cost you $$$$ to pay someone for researching an unusual question (my pet question is whether a high-end restaurant meal with no fee is completely deductible). Unless you are bringing in thousands of $$$ per month is it cost effective? Are you likely to be audited? My approach is to document and declare everything, including reimbursements, which I also list as expenses. I will take my chances with an audit. I am only doing this parttime (say about $1000/month between fees & reimbursements) so I figure the downside of paying additional taxes and penalties is not very big. I declare all mileage, (home to home, postage, long distance telephone, faxes, supplies, and the extra $ that I pay to have unlimited internet access. I have decided not to expense computers and other equipment, as I feel that is a likely audit trigger.
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Julie_WA_Writer
Star Contributor

Western, Washington
USA
1850 Posts

Posted - 10/05/2003 :  12:37:21 AM  Reply  Reply with Quote
See the Tax Guide for Small Businesses at
http://www.irs.gov/pub/irs-pdf/p334.pdf

Schedule C at http://www.irs.gov/pub/irs-pdf/f1040sc.pdf

and Business Use of Your Home at http://www.irs.gov/pub/irs-pdf/p587.pdf

If you are on the cusp of paying SE tax or shooting into a higher bracket, a self employment 401k might be the answer. See http://www.kiplinger.com/columns/ask/archive/2003/q0514.htm

Calculate your employment tax here: http://www.quicken.com/cms/viewers/qanda/taxes/56048

“Great empires are not maintained by timidity.” Tacitus
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