EIN for sole proprietor?

[crmsi]

This topic is probably a bit "small potatoes" for this forum... but we all have to start somewhere, right? :cool:

My affiliate marketing ventures have crossed an income threshold where I'm now being asked for tax reporting information. I'm not comfortable having my social security number all over the place, so I looked into getting an EIN. I was pleased to learn they can be issued to sole proprietors -- I'm not quite ready for LLC or INC just yet!

What is not clear to me is whether I would need to file some sort of business tax return for the EIN, or if the income would pass through and be declared on my personal return. I'm hoping somebody on this forum has experience with that and can lend some insight (as soon as possible -- they're holding my payment!). Thanks in advance.

[vangogh]

First no question is too small. We all started from the same place and I bet a good number of people here haven't had to deal with getting an EIN.

I'm also a sole proprietor and while I don't need an EIN for tax purposes at the moment, I did get one, mainly to protect my SS# where I could. Filling out taxes is a little more complicated for me, but not much. I use a 1040A and file a personal return. For income you then use the Schedule C. Depending on your specifics you might then fill out several other forms along the way. Most of them I found simply by working my way through different questions. The forms will usually let you know you need or can fill out another form.

Several of the forms I fill out have a box for EIN, which is pretty much the only time it comes into play for me. You'll still need to use your SS# if you're filing personally. I'm not sure what you need to fill out to report taxes you've collected if you collect any, but it should be similar.

Or you can do your taxes through something like Turbo Tax and let them find all the forms and ask all the questions. And of course hiring an account is always an option and a good one since he or she will be better able to offer advice with taxes and advice in general.

In general taxes aren't too difficult to deal with. They seem scarier than they really are. You could start by going to IRS.gov (http://www.irs.gov) and looking through the different forms. Start with the 1040A since it's probably what you'll fill out. Grab the form and instructions and just read through them to see what's involved. It can be confusing, but it gets easier each year as you become familiar with the forms and the process.

[crmsi]

Wow, that was fast! Thanks vangogh, I think that's just the info I was looking for. We do use tax software BTW. The income level doesn't justify an accountant yet :)

[Lyrafire]

I use Turbo Tax; it seems to work fine as long as you don't miss something that you should have added in--a bonus check you forgot about or something like that. It's not a bad idea to consult a CPA at least once. A good one will think of things you didn't even know to think about. They can also advise you on managing cash flow and expenditures. Some expenses have to be taken over time; others are deducted all at once. Knowing the difference can save you money. Also, maintaining a home office is important, but it has to be a real room--not a corner in the dining room. If you have a spare bedroom, it's financially well worth putting the bed away and installing a desk. This one deduction can make a big difference in your tax bill--at least it has for me.

Congrats on earning enough affiliate income to worry about the taxes on it!

[billbenson]

In florida I had to get an EIN to get my DBA with the state. I believe I can file with either one. W9 forms have a space for both SS and EIN. I have my taxes done for me so I'm not sure. Most purchasing departments require a SS for sole proprietorships. EIN may be optional.

[vangogh]

Wow, that was fast!

Just good timing on my part. I happened to check in shortly after you posted.

[Evan]

Having an EIN is good for business, even if it's not required. It's just another number where if I told you the number, it wouldn't matter. Certainly it provides a safeguard against abuse from your SSN.

If you're a sole proprietor, the EIN you are assigned is for you doing anything as a sole proprietor. So if you decide to run a jewelry repair shop, and a website development firm. a boutique hotel, and a pet supply store all as a sole proprietor, you can use the same EIN. The EIN belongs to you individually, or to a company specifically. It doesn't apply to just the name of the company you're operating. This is, unless, you change the legal structure of how you operate.

Schedule C can only be filed on 1040, not 1040A. The 1040A has no line to report "Business Income", or even pass-through income from say an S-Corp or partnership. Once you have that business income, 1040 is your friend.

Also, while it may be tooting my own industry's horn -- I highly recommend getting your return prepared by a professional. Tax software is only as good as the data that you input. You may assume certain things are deductible, but they aren't fully deductible, or aren't deductible on Schedule C. Some things may not add up correctly as well. A tax professional can guide you and prepare your return at a reasonable fee, probably far less than you would think. To minimize the cost of services, it is best for you to have as much information as possible in a summarized format. If you bring a shoe box of receipts, you'll pay dearly.

Plus we can show you other deductions you may have missed. There are a lot of deductions we find people missed when they prepare their own return, and it's usually easy to identify client mistakes that may have caused you to overpay in taxes. But I suppose paying $300 extra in taxes is OK, because you saved $200 in tax prep fees.

[vangogh]

Schedule C can only be filed on 1040, not 1040A.

My apologies. Evan is right. It's the 1040 I fill out and not the 1040A. I'm not sure why I mixed up the two.

[Evan]

My apologies. Evan is right. It's the 1040 I fill out and not the 1040A. I'm not sure why I mixed up the two.

I didn't know if they gave you different tax forms over in the mountains than they do here on the east coast... :)

[vangogh]

We mountain folk get all sorts of different things thrown at us, but not forms from the IRS. The treat us the same as everyone else. :)

Not sure why I spaced on my first post. Can I blame it on the mountains? Probably not. I guess it was just me.

[Evan]

Maybe you meant to say 1040EZ, because taxes are so E-Z. :)

[vangogh]

Now that is funny. E-Z and taxes. :)

[Top Hat Indexer]

This thread was really helpful for advice on how EINs relate to taxes...thanks everyone!