How do I classify reimbursements I’ve received for mystery shopping?

[Bria1]

I’ve been doing mystery shopping as a side job. They have you go to a variety of places, check out the business, purchase something (which they reimburse up to a certain amount), and write up a report about the service provided. For example, if I get an assignment to go to a restaurant, get paid $5, and get reimbursed up to $10 for the meal I’m required to purchase to review, how is that supposed to be reported on my taxes? I didn’t make enough for them to send me a 1099, so I’m not sure how it breaks down. Is it reported as $15 income with a $10 deduction? Or is all $15 income and none of it is deductible? If the $10 reimbursement for the required meal purchase is deductible, what do I put it down as? I know there are categories for meal expenses that are 50% and 100% deductible, would it be one of those (if so which one?) or neither? If I also made required purchases that were reimbursed at a different type of store that’s not food, do I need put those down in a different category? I just want to put it down the way I’m supposed to, I’ve tried checking different places and have no idea what to do, thank you for your help.

[AmyC]

Reimbursement is not income. Only the actual income above what you spent, the amount paid to create the event and report. In your example, they paid you $5 for the meal experience and report.

You will report all the income on a business sch C. See:

Small Business and Self-Employed Tax Center - complete guide

•  About Schedule C (Form 1040), Profit or Loss from Business    
• Publication 535, Business Expenses
• What is the self-employment tax? video

[Bria1]

@AmyC  Thank you. So just to make sure I’m understanding correctly, even though the payment they sent me will be for $15 in that scenario, only $5 is counted as income then?  Do I put the $10 spent on the meal anywhere on my taxes at all?  I’d tried talking to someone from TurboTax on the phone and they seemed to think I did (since I got stuff out of it even though it’s not really monetary) and they said I should classify it as a 50% deductible meal, but they also gave me other tax advice that was incorrect (that’s a different matter, submitted a review to the company so they could be aware of it), but anyways I wasn’t very confident in their reply. Sorry, I get confused on tax issues, clearly, thanks for your help. 

[AmyC]

Sometimes there are gray areas. The IRS has the 50% deductible on meals as that helps to force people to make reasonable meal choices that are more affordable to their lifestyle. In your case, you are being told where you have to eat and being reimbursed in full.

[sscheerer333]

Hello, I know this is an old post, but I'm trying to understand this.  If a company reimburses $10 for a meal and then pays $5, aren't they going to show the full $15 as a part of the 1099 they will send?  And if the mystery shopper is getting to keep the product (meal in this case), wouldn't that be part of what the company is paying them... thus the full $15 should should be taxable income?  Would it be any different if it was a product instead of a meal?  What if it was something more expensive like a hotel stay or a product like a dishwasher?

[AbrahamT]

It all depends. Typically, the only time a 1099 would be issued to you  in the first place is if you provided the services on behalf of a client or customer See HERE under "Rules for Independent Contractors." In your situation, however you are working for the company and they are reimbursing you for the meal expenses. In that case, they should be issuing you a

 a W2

Reimbursements reported as paid under an accountable plan aren't reported as pay.

Reimbursement reported as paid as a non accountable plan are reported as paid.

Same would most likely hold true for most any of employee reimbursement of monetary incentive which would fall in the category as a business expense. However, a hotel stay for personal pleasure would certainly "NOT" fall into this category  and it goes without say that your employer would pick it up as wage income as you "CANNOT" deduct it as an expense.

And this is where your situation will fall into play, it will depend if the product or hotel stay was offered to you in the form of personal use vs. business use.