Product Testing as Income?

[Rk99]

Hello. I recently joined a product testing company (based in TX, I live in California). I am considered a "mystery product tester" because I first need to buy these products with my own money on Amazon, share the order number with the company, and once the product ships I get a 100% reimbursement as an ACH in my bank account (or I could choose PayPal too). So, I pay for it first, but get all the money back, making it a free product testing. Is the above in any way considered income or "gifts perceived as income" by the IRS. I have proof of all payments and reimbursements, if needed for tax purposes. I get many products that I end up sharing with friends an family, so they are not even all for my own use.

As a separate thing, I do get points for writing questionnaires and making product comparisons for the products (worth between $1.50 and $3.50) ans smaller payments (25-50 cents) for voting on product images/packaging. Once I reach $25 worth of point the company pays me via ACH for those. Now I do know that these are considered income, just like gift cards from taking surveys and have no problem with reporting that. I doubt this company would send a 1099, even if I earned over $600 worth of points,  but am hoping they would not have to include the reimbursements as part of the income. 

Thanks to anyone for helping me with this. I searched the internet but could not find answers. 

[KurtL1 · Accepted solution]

You should enter these incomes under the self-employment income business.

To enter the self-employment income and expenses you would:

1. Enter self-employment income in the Search Magnifying Glass in the upper right hand corner of the screen.
2. Select Jump to self-employment income.
3. Answer the questions on the screens.

On your Product Testing self-employment, you would show your cost of the products and the reimbursement as income. On your Product Questionnaire and Product Comparison income you would add this as a separate income on the Product Testing self-employment. This is similar type of income. If you have any other "Out of Pocket" expenses, you can deduct them as self-employment expenses.

You cannot deduct the cost of the items you give to your friends as gifts.

If you received any income that exceeds $600 you should receive a Form 1099-Misc.

[Rk99]

Thank you for your response KurtL1. Just wanted to make sure I understood that correctly. On the products themselves, In the event I do receive a  1099 or not that includes the reimbursements of the products as income, I would be able to enter the full price paid for each product as an expense, so that they sort of "cancel each other out"? 

Thanks again!

[rohitpratapitm]

Following...

Even I would like to know the answer. 

[RobertG]

Yes, the best approach is to report the entire amount you are paid and then deduct the amount you pay for the products.  

That way they cancel each other out, and if you do get a 1099, you have reported the income.

@rohitpratapitm

[themergoger]

I know now the law for threshold is changing come 12/31/2021 would this also apply if you get a 1099k form.

You deduct the amount of the item you test from the amount you were paid for the item is this still correct.  

Do you have to send the IRS a balance sheet showing each purchase?

[PattiF]

You should enter these incomes under the self-employment income business. This would apply to income reported on a 1099-K or 1099-NEC.

To enter the self-employment income and expenses you would:

1. Enter self-employment income in the Search Magnifying Glass in the upper right hand corner of the screen.
2. Select Jump to self-employment income.
3. Answer the questions on the screens.

On your Product Testing self-employment, you would show your cost of the products and the reimbursement as income. On your Product Questionnaire and Product Comparison income you would add this as a separate income on the Product Testing self-employment. This is similar type of income. If you have any other "Out of Pocket" expenses, you can deduct them as self-employment expenses.

You do not need to send a balance sheet to the ITS. Your Schedule C for self-employment will show what you were paid and the expenses that you paid.

[techie-teacher]

What about mileage? If your Amazon (or other product testing items) are shipped to a business "post office box" street address instead of your home address (for security and convenience), can you deduct the mileage when you go pick up the packages/items?

If you are keeping track of the items purchased and the amount rebated, do you need to keep track of what is done with each item? 

[DaveF1006]

It depends. Business mileage works by:

• Leaving home to your first business appointment or your place of business is commuting. Once you arrive at the first business destination and to all business destinations going forward is considered business mileage.
• After you finish your last business appointment and decide to go home, this is not deductible because this is considered commuting.
• if you leave home to pick up your packages and items and then go back home, this is considered commuting thus the mileage is not deductible.
• However, if you are conducting business during the day and you happen to drop by the post office in course of your business, then the mileage can be included as business miles.

 You do not need to account for what is done with each item for tax purposes.