EIN Question

[Kram BergGold]

For years my client has been operating a Schedule C business and has an EIN for it. Now she is starting a new Schedule C business which requires an ID #. The IRS said use the number for both businesses. Isn't this is incorrect?

[WhiteOleander]

The way it was explained to me is that the Sch C filer gets one EIN no matter how many C's he/she files. The number is attached to the taxpayer. But, if they open a different entity like a LLC etc., then that entity would get a number. It is now the taxpayer, not the individual.

[Davc]

The EIN is not actually for the business, it's for the entity. Since both businesses are owned by the same SP, the IRS is correct.

[Kram BergGold]

thanks

Whiteoleander and Dave thanks for the responses.

[oceanlovin'ea]

I agree too. The EIN belongs to the taxpayer so no matter what kind of business or how many businesses she has as long as she is a sole proprietor that will be the EIN she uses for all of them.

If she formed an LLC and was still taxed as a sole proprietor, the LLC would get an EIN and she would use that one for that business.

Linda.EA

[taxea]

I agree too. The EIN belongs to the taxpayer so no matter what kind of business or how many businesses she has as long as she is a sole proprietor that will be the EIN she uses for all of them.

If she formed an LLC and was still taxed as a sole proprietor, the LLC would get an EIN and she would use that one for that business.

Linda.EA

Don't you all mean that the EIN is used if the sole proprietorship has employees for the purposes of filing payroll tax? An EIN isn't used on a Sch C.

[Gary2]

Don't you all mean that the EIN is used if the sole proprietorship has employees for the purposes of filing payroll tax? An EIN isn't used on a Sch C.

There is space on the Sch. C for the EIN, though I don't know how the IRS uses it.

In both cases (LLC, assuming single member LLC that's ignored, and Sch. C), it would only be for employees. The IRS is discouraging the use of EINs on W-9s for disregarded entities.

[oceanlovin'ea]

yes, of course, the EIN would only be used if she needed to use it for payroll purposes.

If she needed to give 1099-misc to someone, which number would she use, the EIN or her social security number?

Linda, RA

[Jesse]

Don't you all mean that the EIN is used if the sole proprietorship has employees for the purposes of filing payroll tax? An EIN isn't used on a Sch C.

http://www.irs.gov/instructions/i1040sc/ch02.html#d0e274

Line D
Enter on line D the employer identification number (EIN) that was issued to you on Form SS-4. Do not enter your SSN. Do not enter another taxpayer's EIN (for example, from any Forms 1099-MISC that you received). If you do not have an EIN, leave line D blank.

You need an EIN only if you have a qualified retirement plan or are required to file employment, excise, alcohol, tobacco, or firearms returns, or are a payer of gambling winnings. If you need an EIN, see the Instructions for Form SS-4.

Single member LLCs. If you are the sole owner of an LLC that is not treated as a separate entity for federal income tax purposes, you may have an EIN that was issued to the LLC (and in the LLC's legal name) if you are required to file employment tax returns and certain excise tax returns. However, you should enter on line D only the EIN issued to you and in your name as a sole proprietor. If you do not have such an EIN, leave line D blank. Do not enter on line D the EIN issued to the LLC.

[Black Bart]

One number? Two numbers?

For years my client has been operating a Schedule C business and has an EIN for it. Now she is starting a new Schedule C business which requires an ID #. The IRS said use the number for both businesses...

This is what I've always heard although I don't like it. It's never made sense to me and it's inconvenient -- usually I want to keep the payroll reports of two businesses separate from each other.

I've had clients apply and IRS wrote them back and saying they already got one previously and to use the old one (sometimes -- not always; occasionally I've seen a client get one when he already had one -- probably just depends on the IRS clerk).

On the other hand, White Oleander's right about IRS sending two numbers (if the taxpayer did not already have one) when applying for an LLC. My sole prop client applied five years ago -- never had a number before. He got two; they said one was for him as an individual and one was for the LLC. We're using the LLC # on Schedule C & 941s with no problems -- I think IRS said do it that way (don't remember now exactly what they said).

Last month a banker asked my no-payroll LLC client for an EIN. I applied online, got it, and an app category was "Additional LLC Information" -- under that was "Reason for Applying." Checkboxes furnished included "FOR BANKING PURPOSES" (which suited us just fine, of course).

[outwest]

Just read up on this this morning..

First, recall that the IRS is currently issuing two EINs with disregarded LLCs : one for the owner and one for the LLC.

The W-9 instructions (page 2 of the form) instruct us to enter the owner's personal name on the 'Name" line with the LLC Name on the "DBA/disregarded" entity line.

On the page 3 the instructions you may enter the the SSN or the EIN of the owner (note the two EINs referenced above) . As noted, the IRS prefers the SSN, in a world of identity theft, I prefer the EIN. This would also be the EIN to show on the Form 1040 Sch C

For payroll tax reporting, you would use the EIN of the LLC (the 2nd EIN issued above).

This brings up some interesting questions, I don't know the answer to. For instance, what if the taxpayer decides later in the year to "check the box" for corporate taxation? I wouldn't think you could use the "personal" EIN for the return, but the 1099s will come might come in that EIN.

[taxea]

The problem is that none of these entitees procedures are consistant among them. Banks require EIN if TP is using a business name on the account. DCCA requires an EIN when registering a business as anything other than a sole-proprietorship (which doesn't require registration with DCCA). If the only reason for the LLC status is to limit liability for a sole-proprietor DCCA and bank still require an EIN. IRS doesn't require an EIN for sole-proprietorship and apparently doesn't want it used for either the Sch C or payroll.

My state has an Excise tax and even though the EIN is not used on the Sch C or the payroll tax forms they require the last for digits of the EIN on the GE tax form. o


None of this makes any sense and it would be nice if all other entites would conform their ru;les to the IRS use of the EIN since they are the ones that issue the number!

[Black Bart]

941 but not C

...Single member LLCs. If you are the sole owner of an LLC that is not treated as a separate entity for federal income tax purposes, you may have an EIN that was issued to the LLC (and in the LLC's legal name) if you are required to file employment tax returns and certain excise tax returns. However, you should enter on line D only the EIN issued to you and in your name as a sole proprietor. If you do not have such an EIN, leave line D blank. Do not enter on line D the EIN issued to the LLC.

Thanks for the tip, Jesse. I had just assumed the LLC number would go on Schedule C as well as the 941, but your IRS quote shows that's not right. Stilll, the fact that I filed a C that way for five years without making a wave indicates nobody's minding the store on such things.