Please not that I am not a tax professional, so please understand that this in not tax advice, and may not be accurate. I recommend consulting an accountant. Also, TurboTax is very helpful in walking you through filing your taxes.
Yes — you are required to report all of the money that you receive as a mystery shopper to the IRS. This means that you report all of your fees AND your reimbursements.
As a mystery shopper, you are considered an ‘independent contractor.’ Which basically means you are running your own business, and the mystery shopping companies are your clients.
That means you will do your taxes as though you were a ’sole proprietor’ of a business. Effectively, you will end up paying taxes on the total profit you earned during the year. This is actually very good news, because it means you are open to a whole new world of deductions that AREN’T otherwise available.
This means that any money that was necessary to spend as part of completing your assignment, you will be able to deduct from your earnings. You will also be able to deduct your driving mileage, which is around Fifty Cents a mile. In essence your expenses as a mystery shopper are deductible.
Be sure to keep an accurate record. This is important when it becomes time to file, or in case you get audited.