EIN for nanny and business

[Kram BergGold]

My client has a nanny. He has an EIN for a LLC that he operates as a sle proprietor. I seem to remember that a sole proprietor is supossed to use the business EIN for th ehousehold employee rather than getting a second EIN. If you agree can he do this as well with the EIN for the LLC. The LLC has no employees and never will.

[Koss]

EIN for Schedule H

Schedule H (Household Employment Taxes) does in fact require an EIN.

I would not recommend using the EIN that your client already has. The nanny is certainly your client's employee, but she is not an employee of the limited liability company that already has an EIN.

Using that EIN could create a lot of confusion if he ever decides to sell the business, or take on a "partner" by selling a partial interest in the LLC.

Although the LLC is treated as a sole proprietorship for tax purposes, it is not a sole prop under state law. It is an independent business entity that is separate from the individual. This is why the individual is not personally liable for debts of the LLC.

If he uses the LLC's EIN in connection with an employee who is working for him in his individual capacity, and who is not really working for the LLC, this will blur the boundary between the individual and the LLC. The protection offered by the LLC structure could disappear.

It's just a bad idea all around. He would end up paying the nanny with personal funds, even though on paper she might appear to be working for the LLC. This commingling of funds could cause all sorts of problems.

Your client does have a separate checking account for the LLC, right?



In a worst case scenario, the LLC could appear to be liable for the actions of the nanny, even though she is not really an employee of the LLC. Use your imagination: Nanny drives the kid somewhere in her own vehicle, gets into an auto accident in which she is at fault, and kills the other driver. Lawyers for the victim find out that her tax documents indicate she is an employee of the LLC, and she was working and getting paid when she was driving the kid somewhere...

He just needs to get another EIN for the Schedule H.

BMK

[Koss]

Spelling Rules

When I was working on my answer to Mark's post, I found myself automatically typing the word nanny with a capital N. I caught it before submitting the post.

I guess maybe it's because I think of it as the title of that TV show...



BMK

[taxea]

The EIN is required because this type of business may be required to register however, the EIN holder has chosen to be a sole-proprietor. All tax filings would be made under the EIN holders SSN. You could make a note or attach a statement explaining that the EIN was issued as required however the holder is a disregarded company...ergo using the SSN for tax purposes. Or you could call the hotline, ask them what the proper way to do this is and then post it for the rest of us.

[Koss]

Huh?

I don't know what you're talking about.

On my reading of the original post, the taxpayer has an EIN that is used by a limited liability company. The limited liability company has no connection to the person who cares for his children in his home.

He cannot use the LLC's EIN to file Schedule H and pay the applicable household employee tax. The nanny is not an employee of the LLC.

He needs a different EIN for Schedule H.

The instructions for Schedule H say that anyone filing Schedule H must have an EIN. Use of the SSN is not an option.

The taxpayer in question does not really have an EIN. He happens to be the managing member, and also happens to be the sole member, of an LLC that has an EIN. He cannot use that EIN to file Schedule H.

The fact that the LLC is treated as a sole prop is irrelevant. It is a business entity--not an individual.

The individual taxpayer needs to obtain a different EIN in order to file Schedule H. He can't use an EIN that belongs to an LLC just because he happens to be the sole member of that LLC.

Suppose he was the tax matters partner of a general partnership. The partnership already has an EIN. Gee, do ya think he could use "the EIN that he already has" to file Schedule H?

BMK

[veritas]

If your client has employees

My client has a nanny. He has an EIN for a LLC that he operates as a sle proprietor. I seem to remember that a sole proprietor is supossed to use the business EIN for th ehousehold employee rather than getting a second EIN. If you agree can he do this as well with the EIN for the LLC. The LLC has no employees and never will.

in his business, your client can report the household employee on the company's 941 and 940 rather than using Sch H.

[taxea]

sorry Koss, I misread the original post...but my post is still accurate for a sole-proprietor LLC if disregarded

[Gary2]

in his business, your client can report the household employee on the company's 941 and 940 rather than using Sch H.

As stated in the base note, the company has no employees, and hence no 941/940. Even if there were no other arguments against it, it wouldn't be worth the effort of generating otherwise unnecessary forms.

[veritas]

What is a base note?

As stated in the base note, the company has no employees, and hence no 941/940. Even if there were no other arguments against it, it wouldn't be worth the effort of generating otherwise unnecessary forms.

And I did not read anything that said the client had employees or not.

I also said "if" there were employees.