@myst4au wrote:

I actually had an office audit by the IRS (the type where you show up in their office with all of your records). I was as prepared as I could be. The items they had questioned were all found in my favor. As the audit progressed, I found other items where they would owe me money. After 3 hours, the agent went to talk to his boss. They offered me a deal. If you agree that we are "even" for the tax year being audited (no one owes money either way), we won't audit your return for the next tax year (which he of course had). Even though I was sort of having fun, I accepted the offer. I had records and receipts for everything. It was a lot of work.

Good for you! If it ever happens to me, I hope this would be how it would go. My records are messy in some areas, but when push comes to shove I'm good at putting information together to make a case. Plus I err on the side of caution. Heck, I havn't even deducted mileage on my mystery shopping this year. I definitely will next year given the cost of gas. (Can I start mid-year? I always thought you had to have your odometer reading on January 1st.)

Yes, you can start mid-year!

What's funny is that my car is at 99,269 miles today. I'm tempted to start right when it hits 100,000 because that satisfies my OCD tendencies!

Heck, I havn't even deducted mileage on my mystery shopping this year. I definitely will next year given the cost of gas. (Can I start mid-year? I always thought you had to have your odometer reading on January 1st.)[/quote]

If you got an oil change or any other work done on your car this year the mileage will be recorded on the receipt. So perhaps you can start earlier if it is easy for you to reconstruct. I keep a record of every trip... not ocd except about mileage!

I track each shop day with Google maps (or MapQuest if I have more than 10 destinations). If you have a record of the shops you've performed this year, you can go all the way back to January and have accurate mileage for the entire year broken down into days. You do not have to research exact addresses for every location because the mapping tool will [usually] populate the addresses for you (i.e., you can type in "McDonald's, City, State" and all locations in the city and state entered will appear in a dropdown menu - choose the location that you remember shopping). It does not take very long to figure up a month's mileage using this method. Hope this helps.

@amyann2 wrote:

Heck, I havn't even deducted mileage on my mystery shopping this year. I definitely will next year given the cost of gas. (Can I start mid-year? I always thought you had to have your odometer reading on January 1st.)

Thank you, that's very helpful!

Yes - I was audited in 2008 for tax year 2006. I did not perform any mystery shops in 2006 - I was working full time at a chain salon that operated throughout the northern part of my home state as a W2 employee. I claimed mileage and expenses because I was considered a 'floater' - I worked in 11 different locations as needed when they were short staffed. I was required to use my car and stay in hotels as needed. I was paid mileage but the amount paid was taxed and was not as much as the IRS allowance, so my accountant filed for the discrepancies.
The audit was an absolute nightmare and it lasted for 2 1/2 years. My accountant had all of the documentation that was required, and it was sent in a timely manner. Documents were mailed (with tracking) and the IRS reps claimed they never received the information. The accountant faxed documents and we were informed that the faxes were never received. Multiple phone calls on her part and my part achieved nothing. The issue was finally resolved in 2011 and monies deducted from my 2009 refund were returned. I hope I never have to go through an audit again. Please make sure you keep records (and copies) of everything!

@amyann2 wrote:

I'm curious, has anyone on here ever been audited? I *like* to think it would be a headache, but no real danger because I err on the side of caution. It would be such a PITA to reorganize all those receipts but i hope they would find all my filings in compliance.

I have been doing side work since 1996. Each year when doing my taxes, when TurboTax or HRBlock asks me to enter my 1099 information for my side work, I have NEVER entered any of the information. I simply report all income and expenses on Schedule C.

With PayPal now reporting income, I'm concerned with the people working at the IRS not understanding Mystery Shopping or the work of Independent Contractors. They could make the mistake of doubling our income.

Edited 1 time(s). Last edit at 07/14/2022 03:44AM by johnb974.

And then you just explain that, show your elegant, perfect records to the auditor, and you're home free.

@ceasesmith wrote:

And then you just explain that, show your elegant, perfect records to the auditor, and you're home free.

Than they hold up two 1099's, one from PayPal and one from a MSC, and then tell you, "Our records show you got paid twice. Or their computer adds both 1099's together. (because someone did not program the computer right) Will have to wait and see what happens next year.

You keep insisting that you will get two 1099 forms, one from the MSC and one from PayPal. I understand that is your fear, but that is not the IRS regulation. The new regulation calls for a single 1099 from PayPal.

And if your worst nightmare comes true, do what Cease says. You have your very detailed records in Excel. You show - to the penny - where the total from PayPal came from (fees plus reimbursements plus whatever else there might be included like money sent to you by your second-cousin-twice removed) and then you show where in that list the money from the MSC is included in your impeccable records. It will cease (pun intended, Cease) to be an issue.

@johnb974 wrote:

@ceasesmith wrote:

And then you just explain that, show your elegant, perfect records to the auditor, and you're home free.

Than they hold up two 1099's, one from PayPal and one from a MSC, and then tell you, "Our records show you got paid twice. Or their computer adds both 1099's together. (because someone did not program the computer right) Will have to wait and see what happens next year.

There will be numerous instances where a self-employed person who provides services to a business customer will receive a 1099-K from the payment app and they will also receive a 1099-NEC from the same customer for the same payment. .....you will get two 1099's.

This is truly speculation. TY 2022 is barely half over. 1099 forms for TY 2022 will not be prepared until 2023. Yet you are sure that there will be "numerous instances" of double 1099 forms being issued. Will there be some? Maybe. And as we have been telling you, your impeccable records will come to the rescue anyway if you are audited in some future year. Just be sure to hold onto all of your receipts (electronic images will suffice), payment information, mileage records, etc. for 7 years. Of course, you are doing that anyway, so what is the issue?

@johnb974 wrote:

There will be numerous instances where a self-employed person who provides services to a business customer will receive a 1099-K from the payment app and they will also receive a 1099-NEC from the same customer for the same payment. .....you will get two 1099's.

Nice pun, Myst!

Now, John, every single payment I receive through PayPal tells me who paid it.

If Mystery Researcher pays me $18,000 this year through PayPal, and I receive 2 1099s, each showing $l8,000, by showing my elegant and perfect records, I can conclusively prove that I reported $l8,000 in se income, that $l8,000 was the total income received, that I properly deducted the related expenses, and so on. Times however many MSCs pay me through PP, or any other 3rd party system (they are all under the same reporting requirement, as I understand it).

If you are unable to prove you reported all income, blame poor record-keeping, not the system.

However, John, I freely admit and agree that IRS is understaffed, undertrained, overwhelmed, and extremely error prone. Your worries are justified.

But instead of worrying about something you cannot control, use all that energy to focus on something you CAN control -- your own recordkeeping.

For example, one year, standing in the line at the post office at quarter of five on the last legal day to mail my paper returns, I got a weird feeling, and mailed my return priority mail, return receipt requested. It was about 3 months before the little green card came back. I stapled it to the receipt for the Priority Mail, which was stapled to my copy of my return. My return sat in IRS's mailbox over 6 weeks before an employee signed for it and picked it up. So they didn't even look at my return until after I was expecting my refund!

I sent a letter. About 6 months later, I got an answer -- I hadn't filed my return timely, therefore they kept my refund (in excess of $2,000) and I would not be receiving it. I copied that letter, my Priority Mail receipt, the little green card that showed the date it was actually picked up at the post office, and wrote a scathing reply that "here's my proof -- yes, it was the last legal day to file timely, but I did, and here's the proof". About a year later I got my refund, plus interest.

Record keeping, John, record keeping!

(And, BTW, that is the ONLY time I felt compelled to use Priority Mail for my tax returns. Weird, huh? )

Edited 1 time(s). Last edit at 07/15/2022 08:44AM by ceasesmith.

I propose a standing ovation for Cease's post. Please, stand, applaud, cheer!

By the way, China is most certainly a communist country. They control what you watch, what you can own, who and what you can listen to, and at one point how many children you could have amoung other things.