How To Save Yourself From A Mystery Shopping Tax Headache At The End Of The Year

If you are accustomed to working in an hourly or salaried position for an employer, you may be in for a big surprise when tax time rolls around at the end of the year. Employers withhold federal income taxes from each of your paychecks, saving you from the headache of having to pay taxes at all or pay as much income tax at tax day as you would have to without employer tax withholdings.

As a mystery shopper, you are a self-employed contractor. Along with the convenience of being to choose which assignments you work on, when you work, and how much you work, comes the headache of having to handle your own income tax withholdings. Your mystery shopping provider may send you a check for a job well-done, but the provider is not withholding any income taxes. What this means is that you can owe the Internal Revenue Service a lot of money in income taxes at the end of the year. Fortunately, there are steps you can take as a mystery shopper to avoid the hassle of owing income taxes.

Withhold Your Own Income Taxes. The smartest thing you can do as a mystery shopper is to take out your own income taxes from each paycheck you receive and hold that amount of money in a savings account. Then at the end of the year, you will have income taxes stashed away to pay your bill. Many people end up paying the IRS between 10 to 20 percent of their gross income as income taxes. So for every $10 paycheck you receive, plan to transfer $1-2 into a savings account. Then at the end of the year, you will have collected at least a large portion of the income taxes you will owe, if not more than you need.

Use The Tax Benefits Of Being Self-Employed. When you are self-employed, the IRS allows you to write off job-related expenses. So everything from travel expenses to office supplies can be written off. While a $3 package of pens and 10 miles traveled for a job assignment may seem like small potatoes, at the end of the year these small expenses add up. These expenses can be used to legally off-set the amount of income taxes you owe. So if you’re not already keeping track of your businesses expenses for this year, it’s not too late to start.

Use A Tax Professional. Accountants and tax professionals are specifically trained to provide you with tax advice and strategy that can save you a lot of money in income taxes. If you aren’t already working with a tax professional, make some time in the near future to discuss your income tax strategy with a professional. In the long run, the tax advice you receive from a professional can pay off in big-time tax savings.

Avoid the headache of being surprised with a big income tax bill at the end of the year. Take these steps now for proper income tax planning!