Schedule C and EIN

[ttbtaxes]

A client has been a Schedule C and halfway into 2017 he decided to create a single-member LLC from which the business would operate. He applied for a new EIN.

Even though for 2017, he is a Schedule C for the entire year, he has two EINs and customers sending him 1099-MISC in both EINs. Would you prepare two Schedule Cs and separate the income and expenses for the year? If not, and you'd prepare only one, how do you avoid getting a notice from the IRS?

[Burke]

Since he did this mid-year, that's what I would do. Making sure all the former vendors get a new W-9 for the LLC if they are still being used.

[kathyc2]

A client has been a Schedule C and halfway into 2017 he decided to create a single-member LLC from which the business would operate. He applied for a new EIN.

Even though for 2017, he is a Schedule C for the entire year, he has two EINs and customers sending him 1099-MISC in both EINs. Would you prepare two Schedule Cs and separate the income and expenses for the year? If not, and you'd prepare only one, how do you avoid getting a notice from the IRS?

For a SMLLC Sch C, 1099's should be reported under the SSN or owner's EIN, not the LLC EIN. Since you would be reporting higher income than the correct 1099's it should not be a problem.

Client would want to provide correct W-9's to customers so that 2018 will be correctly reported under SSN or owner EIN.

[John of PA]

I would do 2 Sch C, one is a separate entity.

[Gretel]

My 2 cents

SMLL's are disregarded entities for tax purposes. They are a separate entities for state purposes only. I would create one Schedule C. Depending if TP has employees, I would use either LLC or individual EIN. Same goes for correcting W-9's if at all necessary going forward. If any mail arrives from the IRS it is easily explained. If it is important for you and/or your client to not risk any IRS mail for this issue, then two Sch. C's might be in order.

I believe IRS matching is mainly with SS # and they have the records which SS# is associated with which EIN's. With all the confusion on this issue I never have seen an IRS letter because 1099 was not filed correctly unless they could not match with SS# or EIN.

[taxea]

A client has been a Schedule C and halfway into 2017 he decided to create a single-member LLC from which the business would operate. He applied for a new EIN.

Even though for 2017, he is a Schedule C for the entire year, he has two EINs and customers sending him 1099-MISC in both EINs. Would you prepare two Schedule Cs and separate the income and expenses for the year? If not, and you'd prepare only one, how do you avoid getting a notice from the IRS?

As Gretel says he doesn't need the EIN unless he has employees, otherwise it is only required by the bank for a business account. He should notify the IRS which EIN he is using and revoke the second one. He continues to report on a Sch C using his SSN. The W-9 should also show his SSN.

[TaxGuyBill]

I would do 2 Sch C, one is a separate entity.

SMLL's are disregarded entities for tax purposes. They are a separate entities for state purposes only. I would create one Schedule C.

I agree. :-)

For income tax purposes, the IRS would be okay with one Schedule C. However, for the legal protection that an LLC an provide, mixing the LLC with non-LLC things may 'pierce the veil' of protection. To help maintain the legal protection, I would file two Schedule Cs, even though the IRS would be okay with one.

[ttbtaxes]

None of the 1099-MISC he received had his SSN. They only had an EIN, What's a little dicey is that certain customers/clients sent the 1099-MISC containing the payments made to my client for the entire year.

If I choose to separate it, I'll have to go back and make sure that the total revenue as reported by the 1099s by EIN doesn't exceed the revenue per QuickBooks for each Schedule C, as split. I think I checked quickly and it didn't.

[TAXNJ]

Sound like....

None of the 1099-MISC he received had his SSN. They only had an EIN, What's a little dicey is that certain customers/clients sent the 1099-MISC containing the payments made to my client for the entire year.

If I choose to separate it, I'll have to go back and make sure that the total revenue as reported by the 1099s by EIN doesn't exceed the revenue per QuickBooks for each Schedule C, as split. I think I checked quickly and it didn't.

you have it under control. Can't blame your client using an EIN vs. SS# on W-9 especially in today's identity theft environment. After all Paid Tax Preparers use a PTIN vs. their SS# and no problem with the IRS.

[taxea]

It is one business, not two. It doesn't make sense to file two Sch C's. LLC is to protect from liability. It has nothing to do with taxes unless/until one is sued.

[Burke]

I still vote for 2 Sche C's for this year only, due to the circumstances. Since poster has verified the income with QB, what harm can it do? And it will avoid non-matching CP 2000's. taxea is correct in that TP should notify IRS to discontinue additional EIN received, so only one is in their records. He may need it if he ever hires employees. And I like the idea of using an EIN in any kind of business instead of SSN when you have to furnish it to vendors.

[taxea]

It can still go on one Sch C with a Statement of Facts.