Volition.com Forums

Username:
Password:
Save PasswordRegister
Forgot Password / Username?
Home | Search | Chat | FAQ | Posting Rules

 All Forums
 Mystery Shopping, Merchandising & Demo
 Independent Contractor Taxes
 Please explain the $600 minimum amount for 1099 rule
 Reply to Topic
 Printer Friendly

Previous Page

Author Previous Topic Topic Next Topic
Page: of 2

.Dawn DE
Inactive

DE
USA
518 Posts

Posted - 04/06/2007 :  1:49:34 PM  Reply  Reply with Quote
Self employment tax is based on net income, after expenses have been deducted. The rate comes out to 15.3%, 12.4% for social security and 2.9% for medicare.This percentage is multiplied by your net income and added to your tax liability on the back of the 1040. However, half of this figure is allowed as a deduction to your adjusted gross income on the front of the 1040. So, you get one half of your tax multiplied by your tax rate back.

If you made, net, $1000.00, your SE tax is 153.00. Then, $77.00 is deducted from your total income on the front of the 1040. So, if you made 30,000 from your regular job, plus 1000 from self employment, your adjusted gross income is 30000+1000-77 = 30927 (barring, of course, other income or deductions). This tax is figured on Form SE, attached to your return.

Dawn
Go to Top of Page

Nicole in MN
Contributor

Rice, MN
USA
54 Posts

Posted - 06/29/2007 :  1:12:49 PM  Reply  Reply with Quote
I see that there are several threads and questions about filing taxes with mystery shopping, and you would think a person could understand it after reading several pages about it, but I'm still confused.

(1)The $600 and below rule. This just means if you make $600 or more with one company that they will send you a tax form, but regardless of how much you make, whether it's above $600 or not, you're still supposed to report your income, right? Even if it's a very small amount?

(2)If you're going to report business expenses for deductions, that would require someone to also report their income with that bussiness, right? For example, are there people who are self-employed, besides their full-time job, and they report business expenses but do not report that extra income? I believe in my case this would include mileage and supplies like paper, printer cartridges, etc. (3)What if a shop requires you to purchase something, but they will reimburse you for it - then would you report that as an expense, or not, since they reimbursed you?

(4)My last concern is what actually happens when you include mystery shopping in your taxes. Will it take away from my normal tax return next April or will it add onto it? Or does this depend on how much I make mystery shopping?

(5)Right now I make about $25,000 a year with my full-time job and, for example, last year between my federal and state returns, I received about $1300. If I made another, let's say, $300 this year mystery shopping, in what way would it affect my taxes next April?

I'm wondering if for some reason it would take away from my tax return instead of add onto it, and then in that case make mystery shopping a loss for me, instead of a gain. My first shop is this weekend and so far I have a total of 6 scheduled. I'm trying to decide if it will actually benefit me financially, even if only a little bit.

I hope that makes sense. I would greatly appreciate any input. Thanks!

Nicole Schlenvogt
MSPA Silver Certified
Go to Top of Page

.Dawn DE
Inactive

DE
USA
518 Posts

Posted - 07/03/2007 :  12:22:40 PM  Reply  Reply with Quote
To answer your questions.........

1. Yes

2. I'm confused by your question. You must report all income and deductions that are related to it. If employees have expenses related to their work for their employer, that's a different form, and the deduction is limited. Does that help?

3. There are two ways to do this. Either show both, or neither. Meaning, if you take the expense, you must show the reimbursement as income, so that it washes out. Most people, I believe, keep this figure in their records but don't show it on Schedule C.

4. It depends on whether you show a profit or a loss. A loss will reduce your taxable income (will be deucted from your regular job), and a profit will add to your taxable income. Plus, you will owe self employment tax on any profit over $400 (see my comment above). If you make $300 profit (after deductions), you will owe taxes on that. If your marginal bracket is 15%, that will reduce your refund by $45.

Dawn
Go to Top of Page

Nicole in MN
Contributor

Rice, MN
USA
54 Posts

Posted - 07/09/2007 :  10:24:41 AM  Reply  Reply with Quote
Thanks, Dawn. That helps! Could you please elaborate a little more on #4, though? I'm still confused as to whether I will actually be losing money or making money after I file my taxes and everything. Say for example I only make $200 profit in a year of mystery shopping. Thanks!!

Nicole Schlenvogt
MSPA Silver Certified
Go to Top of Page

SJones
Star Contributor

USA
3121 Posts

Posted - 07/09/2007 :  11:09:16 AM  Reply  Reply with Quote
Nikki, if your pure profit of msing (after all expenses) is positive, it adds to your overall taxable income. Therefore, increasing the amount of tax to be paid. If it is more than $400, you also have to pay social security/medicare for that income.

As per your example. Your regular job gives you $25,000 (I assume this is the gross taxable income amount). Your msing gives you a profit of $200. You fill out schedule C with a result of $200 in business profit. On the 1040 is a line, where you have to enter your business income, the $200. That's on the first page of the 1040. Overall you would have $25,200 in gross taxable income (I think that's what the last line on the first page of the 1040 is called). On the next page of the 1040, you would take of the standard deductions as usual.

If your ms balance at the end of the year is negative, it is subtracted from your overall income as a business loss. A loss reduces your overall income and therefore the amount of tax you owe. Thus, your last line on the 1040's first page would show $24,800.

Does this make more sense?

Susanne
MSPA Silver Certified!
Go to Top of Page

Nicole in MN
Contributor

Rice, MN
USA
54 Posts

Posted - 07/10/2007 :  07:11:54 AM  Reply  Reply with Quote
Susanne,

What you said does make sense to me, but I guess the part I'm unsure about is how you say "the more money I make, the more money I OWE." I do understand that it works that way, the more income you have, the more taxes you pay, but does this mean if I'm making money MSing, I will owe more taxes, and it will take AWAY from the return I usually get?? I hope that makes sense. Thank you!

Nicole Schlenvogt
MSPA Silver Certified
Go to Top of Page

Clare
Star Contributor

Texas
USA
1738 Posts

Posted - 07/10/2007 :  07:38:50 AM  Reply  Reply with Quote
Question:
quote:
does this mean if I'm making money MSing, I will owe more taxes, and it will take AWAY from the return I usually get??


Answer: Yes

Go to Top of Page

SJones
Star Contributor

USA
3121 Posts

Posted - 07/10/2007 :  08:42:38 AM  Reply  Reply with Quote
Yes. The reason is, tax is not deducted by the ms companies when they pay you. You are responsible for calculating how much tax you owe and you are responsible for paying the tax you owe to the IRS.

The reason you might get a refund each year is that your regular employer deducts the tax from your paycheck each pay day and pays it to the IRS. The only duty you have is to inform your employer, how many tax credits you would like to take. Thus, if you get a sizeable refund each year, you take more credits up front. If you end up owing, you might want to take less credits the next year. If you are self-employed, which msing is, then you are responsible to pay your taxes annually, or even quarterly, if this is your only income.

Thus, having self-employement income profit, you will owe tax on that profit. This tax will reduce the refund you might expect from the tax your employer has paid for you to the IRS throughout the year.

As a general rule, you don't want to owe anything to the IRS, but you also do not want to get a refund. A zero tax balance at the end of the year is ideal. If you get a refund, that has essentially been a free loan from you to the IRS. That money could have meant a bigger pay check for you each month. Thus, if on an annual basis you expect a big refund, you might want to make some adjustments to your tax credits up front. Same as if you end up owing each year. The difference is, if you owe a sizeable amount, you get penalized, if the IRS owes you a sizeable amount, you do not get 'interest' payments from them.

Susanne
MSPA Silver Certified!
Go to Top of Page

Nicole in MN
Contributor

Rice, MN
USA
54 Posts

Posted - 07/10/2007 :  09:48:42 AM  Reply  Reply with Quote
Susanne,

Thank you very much. Maybe I'm missing something, but if people are actually losing money overall (paying more in taxes and losing money from their normal refund) when MSing and making a small income ontop of their full-time job, then it's not even worth it, is it? I'm not really even gaining anything, just losing?? That is confusing.

Regarding what you said about having a zero balance being ideal, are you saying I should adjust what's on my W4 that I gave to my employer? Now that I think about it, I think I might be claiming 0. So that means they are taking more in taxes than they would if I were claiming 1, correct? I think I decided to claim 0 because I was afraid if I claimed 1 I would end up owing money when I filed my taxes. I'm not sure how drastic of a change it would make in my return if I switched from claiming 0 to 1. Even if I'm letting the IRS "borrow" too much money from me, I'd rather have that than OWE them money.

Nicole Schlenvogt
MSPA Silver Certified
Go to Top of Page

SJones
Star Contributor

USA
3121 Posts

Posted - 07/10/2007 :  10:35:08 AM  Reply  Reply with Quote
It takes away from your refund, because you owe tax on the ms money. However, overall, you have more in your pocket. Let's say you make $100 dollars in ms money and owe 15% tax on it. That's $15 in tax you have to pay to the IRS. You still net $85 after tax. Let's say on your regular tax return without the ms, you would get a $1000 refund. Because you have to pay the ms tax, your refund would only be $985. If you don't get a refund, you would have to add the $15 to the money you owe to the IRS and write a check for. Basically, you owe more tax, but overall, you also have more money in your pocket. In this case $85 more.

For the W4 (I always mix up those forms), generally, everybody takes at least two credits for themselves and one for each dependant. If you do self-employment stuff on the side, you take less. This way, any tax you owe on the self-employment will be absorbed by the refund you would otherwise expect. The goal is to end up not owing anything. You should adjust your credits, if you steadily get a large refund. I don't know what your average refund is, but devide the amount by the number of paychecks you receive. That's about the amount by which your paycheck should be higher each time you receive it. Now, imagine, you put that in the savings account, IRA or up front into your 401k, whatever, how much money you could 'grow' from that. You are definitely better off, having that money in your pocket than sitting around in the IRS accounts. 0 is definitely wrong, if you don't have side income or very little side income. Check with human resources, they will be able to tell you how many you take. You can change that whenever you want to. Try adding a credit and see what the result is. If you are scared you might end up owing, you can start inching it up credit by credit from year to year until your refund is minimal.

Oh, well, maybe somebody with more experience in this matter can explain that more clearly.....

Susanne
MSPA Silver Certified!
Go to Top of Page

Nicole in MN
Contributor

Rice, MN
USA
54 Posts

Posted - 07/10/2007 :  11:06:03 AM  Reply  Reply with Quote
Susanne,

I think you explained it wonderfully! I actually understand now! Thanks for all your help!!


Nicole Schlenvogt
MSPA Silver Certified
Go to Top of Page

SJones
Star Contributor

USA
3121 Posts

Posted - 07/10/2007 :  1:11:00 PM  Reply  Reply with Quote
The IRS only refunds you the portion that was taken out that you actually did not owe. Let's say on your 1040 you calculated that on your income you owe $1500, but your employer had taken $2000 out of your paycheck and paid to the IRS. Then you get a refund of $500 from the IRS, because that's the part you overpaid. You only get everything back, if after all deduction and extra tax credits you end up with a zero tax liability for the year, in which case they still might give you money, because you had to support children or some other reasons.

Susanne
MSPA Silver Certified!
Go to Top of Page

Chris81
Apprentice

Beckley, West Virginia
USA
1 Posts

Posted - 02/05/2014 :  06:38:54 AM  Reply  Reply with Quote
Filing your taxes as an independent contractor can be tricky if you have never done it before. If you ever have any questions, make sure that you consult with someone that has experience!

Christopher
Go to Top of Page

Kevin Eugene Miller
Apprentice

Grenville, SC
USA
3 Posts

Posted - 02/17/2014 :  4:16:29 PM  Send Kevin Eugene Miller an AOL message  Reply  Reply with Quote
How much can I claim when an MS requires a purchase that will be eventually reimbursed? I have heard half the amount.

Kevin Miller
Go to Top of Page

Alan-Texas
Star Contributor

Arlington, TX
USA
542 Posts

Posted - 06/06/2014 :  12:19:34 AM  Visit Alan-Texas's Homepage  Reply  Reply with Quote
Kevin,

I don't know if you ever got an answer to your question, but I was reading through this thread and thought I would go ahead and respond.

How you handle reimbursements for tax purposes depends on how the MSC handles them.

If the MSC says you will be paid $X amount and reimbursed up to $X amount, then the reimbursed amount is ignored for tax purposes. The IRS does not require reimbursed amounts to be reported as income, which means there would be nothing to deduct (claim).

For example, if the MSC says you will be paid $20 and reimbursed up to $50 for a restaurant shop, then the $50 reimbursement is simply ignored. It is not reported as income and it is not claimed as an expense/deduction.

If the MSC says you will be paid a flat $X amount for a shop and any expenses you incur will have to come out of that amount, then the entire flat amount is reported as income on your taxes and the entire expense you incur can be claimed.

For example, if the MSC says you will be paid a flat $70 for a restaurant shop, and you spend $50 during the shop, then the $70 flat payment is reported as income and the entire $50 expense can be claimed as an expense/deduction.

Alan A.
MSPA Silver Certified
Shopping the Dallas / Ft. Worth area since 2005
Go to Top of Page
Page: of 2 Previous Topic Topic Next Topic  
Previous Page
 Reply to Topic
 Printer Friendly
Jump To:
Volition Copyright All rights reserved. Volition is a registered trademark of Volition.com LLC. Go To Top Of Page
This page was generated in 0.19 seconds. Software © Snitz Forums