More On EINs (Employer Identification Number)

Use may use your Social Security Number as your sole proprietorship’s identifying number, unless:

• You must withhold taxes from a subcontractor you've hired.
• You hire one or more employees.
• You set up a self-employed retirement plan (does not include a SEP).
• You are an LLC
• You deal in products that require you to file a Federal excise, or alcohol, tobacco and firearms return.

If one or more of the above applies to your business, you will need to get a nine-digit employer identification number (EIN). An employer identification number, as with many IRS terms, is incorrectly named. All employers must have an EIN but, as you can see from the list above, it's not only employers who must have one.

In the United States everyone must have a Social Security number. Hospitals give them out when a child is born. Think of an EIN as a Social Security number for a business.

Many of you have asked whether you need to get an EIN. Here's a cheat sheet to guide you. The links take you to the EIN application process.

You will need an EIN if you answer "yes" to any of the following questions. If you answer "yes" go here to learn How to apply for an EIN or click the YES .

Do you have employees? YES NO

Do you operate your business as a corporation or a partnership? YES NO

Do you file any of these tax returns: Employment, Excise, or Alcohol, Tobacco and Firearms? YES NO

Do you withhold taxes on income, other than wages, paid to a non-resident alien? YES NO

Do you have a self-employed pension plan other than a SEP? YES NO

Are you involved with any of the following types of organizations? Trusts, Exempt Organizations, Estates, Farmers' cooperatives? If yes. talk with a tax pro.

Note that the IRS now requires an LLC operating as a sole proprietorship to have an EIN.

Here's a couple questions on EIN from my readers.

Hi June! (it's my mother's name, too!)

I am an Actor-Filmmaker living in New York City and have been an indie for 8 years. I am getting married in September and I will be taking my husband's last name. However, I would like to keep my maiden name so I can keep my stage name, accept checks, sign contracts, etc. I am thinking of filing a DBA form. Is that the right move? If I do, do I need a Tax Identification Number from the IRS (this was an option for an additional fee on LegalZoom.com and I'm not sure I need it)? I guess I'm also confused how to use the DBA with my bank account and keeping tax records.

Any advice for a struggling artist?

Thank you so much for supporting us indies! Your support means a lot! I look forward to hearing from you.

All the best,
Sarah


Dear Sarah,

I have many clients who use a maiden name as well as a married name or a hyphenated name with both. Some guys use both a birth name and a stage name. No DBA is required.

Check with your banks and see what they require.

It's a legal situation so best to check with a lawyer, however, I suggest signing contracts with both names.

No you do not need an EIN to use both names.

Happy September wedding!
June

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Hi,

I went on Amazon.com to find a book to help me with taxes. I saw your book, and plan on getting it. However, I have a few questions that may not be in your book, because they have to do with my occupation and a Fictitious Name. I'm thinking of doing graphic/website design here in Florida, generating work from an office in my home. I would perhaps have clients in various parts of Florida and perhaps out of state, via the Internet. The business would be just me; no employees.

Someone suggested that I use my social security number for tax purposes, rather than get an EIN number. And, I'd rather have a Fictitious name, other than mine, appear on my business cards, letterhead, and such.

Is it possible to work as a graphic/website designer without the need of an EIN number, and have a fictitious name?

I look forward to reading your book, since the reviews are all positive.

Sandra


Dear Sandra,

The feds do not require you to have an EIN for a fictitious name. However, since you will have checks made out to you in your business name, your bank may require it .

Best,
June

Expenses Must Be Separated by Profession

Hello,

I am have just gotten my first role in film as an actor & stunt man and I imagine I will be having more roles.

I have also been accepted in to the teamsters union. Both acting and trucking for film pay about $800 / day. However the jobs only last a short duration. I will be taxed at a very high rate and it want to get it back. I pay a fortune for classes, associations, union affiliations, agents, head shots, wardrobe, travel associated with classes or interviews, and all sorts of other things.

I have just set up a bank account named "sag and teamster" can I put all of my deductibles on that and send in the bank statement and use the whole thing as a deduction?

I have never filed an itemized tax return.

Thank you,
Jonathan
Angel Fire, NM


Dear Jonathan,

Congratulations! Hope you get a lot more acting work.

Where or how you track expenses does not determine whether the expense is a business deduction.

You must keep acting expense separate from trucking expenses. Also know that acting expenses go on a different part of the return than do trucking expenses.

Your question indicates that you know very little about taxes. So to get the best tax benefit you should not prepare your own tax return.

Best,
June

Shared Rent: You may still deduct for home office

Hello June,
Thanks for your thorough and detailed site. It's great to know there are experts like you who are on the side of us freelancers. We are in sore need of information. It's a hard job to have, plenty of rewards and plenty of challenges.

My question ... I'm a self-employed actress, playwright and theater-based educator. I've taken a home office deduction for the past 3 years, but this year, I'm not sure what is appropriate for me to deduct. In fact I'm wondering if it was alright for me to make those past years home office deductions in the first place.

I share a house with 5 other urban, single professionals. I have my own large bedroom in which a section is devoted to my home office where I have a desk, computer, printer and files. Can I deduct a home office expense? That small section of the room is exclusively used for business purposes. However it's not a separate room or even partitioned off. And I share the rest of the house with other people. So if I could claim a deduction -- then how much could I claim? The rent I pay is for the room and shared use of kitchen, living room, etc. Apart from your response, the option I have for next year is to just move my office section to the basement. A student I live with would use one section for her office, and I could use another section. No one else uses that half of the basement. On the other side of the basement is the washer and dryer and a rehearsal space for a music band of former housemates. Would this be a more appropriate deduction?

Thank you for your time, Anu from DC


Hello Anu,

You are welcome. As you can tell from the lag time between your question and my answer, the freelancers seeking questions are many.

Yes, you have a legitimate home office expense. Here's a hypothetical of how you would calculate your deduction. Follow the arithmetic carefully.

Four of you share an apartment.
Rent is $2000, you each pay $500. [2000/4]
Apartment is 1,600 square feet.
You each have your own room and share the rest of the apartment.
You each pay $500 per month for 400 square feet. [1600/4]
You use a 20 square foot area [5 ft X 4 ft] of your room exclusively for business.
20 divided by 400 = 5%. You use 5% of your share of the apartment for business.
So you may deduct 5% of your share of the rent, or $25 per month.

Hope that's clear. Please let me know.

Best,
June

Actor's Expenses

June --

I know it's late in the game here but I just found your site and would like to clarify if possible....My wife is an actor and receives W-2s for all the work she does. When using TaxCut, can/should I create a business for her in the Income section, and subsequently deduct her expenses there? Or should/can these deductions only be done later in the Deductions section? I always thought that being a working actress, she owned her own business, but if she receives W-2s, it seems she actually technically is an employee on each job huh? Would I be able to save more money one way or the other?

Thanks for your help...the site is already so helpful!
Ry


Hello Ry,

A couple of points before I answer your question: If you've read my writing on my website, blog or in my books you may already know that I have found no tax preparation program that does the job right for indies -- the programs are geared for employees and don't do the fine-tuning required for self-employeds; I think indies should not do their own tax returns -- they usually cheat themselves; I don't give tax return preparation instruction to indies.

That said, here's how it works for all my actor clients. Their income comes in as both wages for employees and as freelance income on 1099s. Almost always, unless they are doing a showcase or work for some small live theatre, the income comes in as W-2 wages. This is not self-employed income. There is no self-employed business. The expenses must be deducted as they are for all other employees. However, depending on the actor's income and expense amount these expenses may be deducted on the front of the tax return as an adjustment-to-income. This is a much more tax advantageous treatment.

If the actor receives income as both an employee and as a self-employed then expenses must be split between the two.

I'm happy my site is helpful. Please tell your friends and colleagues.

Best,
June

New York City Tax Professional Needed

June --

I am an Actress/Exercise Instructor. I have not yet read your book, Self-employed Tax Solutions, but am planning to do so. Your website/blog are both great. Any classes you will be teaching in NYC? If not, could you recommend -- classes or a colleague? I have worked with an accountant for several years but would like someone knowledgeable in Quicken and financial planning. Thanks in advance!

Katie


HI Katie,

So glad you like my site & blog. Thanks for letting me know.

I am currently in upstate New York but have no planned speaking gigs in NYC. Finding a tax pro knowledgeable about indie taxes is always difficult. I don't know one on NYC although I had an office there for many years before heading west. You might call SAG [Screen Actors Guild] for a recommendation. Finding someone will take some work on your part. These posts on my blog may help in making your choice. -- if you've not already seen them:How to pick a Tax Professional
It's tax time so ... beware of bad advice from the real-life Sammy Segar, CPA
Clueless Professional Accountant (CPA) Says You Can’t Deduct a Gift to Your Mother Pick a Tax Professional: Experience or Price

Perhaps someone who reads this can point you to an appropriate tax pro.

Best regards,
June