As a mystery shopper, you are not a traditional employee of a company, but instead you are a self-employed independent contractor. One of the biggest difference between working in a salary or hourly position and being on your own as an independent contractor is how your taxes are handled. When you get paid through a salary or hourly position, a portion of each paycheck is usually withheld and goes toward your taxes. At the end of the year, this tax withholding generally means that you don’t have to much (and often any at all) in additional taxes to the government.
As an independent contractor, however, nobody is withholding your taxes for you. So when tax day rolls around next April 15, you may find that you have a gigantic tax bill to pay. The good news, however, is that there are some things you can do right now to make tax time a far more manageable time of year for you. Here are some tips to follow:
Tax Estimate. If you are savvy with your finances and taxes, you may be able to generate your own approximate tax estimate. Of course, to do this with any accuracy, you will need to have a rough idea of both your mystery shopping income and expenses. You can also use your previous year’s tax return to see how your net income or net loss from mystery shopping will affect your overall tax bill. If you are’t tax savvy, you can get this same information from an accountant.
Sock Cash Away. So just what do you do with that tax estimate that you or your accountant has generated for you? This estimate is the amount of taxes that you will owe when tax day rolls around, and if you don’t have that kind of cash sitting around in a savings account, you will absolutely want to start saving for this big expense. The best thing to do is to plan on saving a small amount every week or every two weeks. If you cannot afford to save the full amount right now, keep in mind that saving some of it is better than saving none at all!
Write-offs. As an independent contractor, you are thankfully permitted to write off more of your expenses than you would be able to write off as a salary or hourly employee. Perhaps the biggest write-off for mystery shoppers is the write-off for business miles traveled. This is an easy write-off to take advantage of, and it just requires you to keep a small journal of your business miles traveled. There are other write-offs that you can put to use, too, such as those for your home office, office supplies, and more. You will want to take time to learn more about these write-offs so that you can fully put them to use. This is a great way to save money on tax day!
Nobody wants to be shocked by an outrageous tax bill due on April 15. When you take time now to put these strategies into motion, you can better plan for any taxes that will be due.
Disclaimer: Please note this is not tax advice. Consult a qualified accountant for your tax questions.