TIN for Sole Proprietorship – How Tax Identification Numbers can protect personal identity online
Tax Identification Number (TIN) Protect Professional Identity Online for 1099 submissions
This section probably belongs in the intermediate to advanced part of our programs, but considering the importance of protecting your identity online, we recommend to all writers, bloggers, affiliates, marketers, social media specialists and publishers that they should establish a tax identity number with the United States IRS (sometimes referred to as a TIN, Tax ID Number, or EIN -> Employer Identification Number) as one step in identity protection if they expect to receive 1099 from advertising or affiliate networks.
When you start up your own business online, there are two basic ways to establish your company:
- You can work as a contractor and utilize your social security number for tax purposes, or
- You can establish a business, setting up the business with a tax identification number from the IRS
This is not a choice we can make for you nor dictate to you, but the reason why we recommend considering a tax identification number in the second approach is driven by one priority.
Keeping your social security number safe with a TIN number!
If you establish a ‘sole proprietorship’, a ‘limited liability company’, a ‘limited liability partnership’, a ‘S Corporation’ or a ‘Corporation’ you will need to establish a taxpayer identification number for that entity.
Establishing a sole proprietorship is the easiest approach, although there are significant tax and legal reasons to consider the other options.
If you determine that you are going to operate your own business working as a publisher or consultant or affiliate of your own online publication, you could establish yourself as a sole proprietor (sole owner) of your business right now, fill out the online application with the IRS in minutes, and have an official tax identification number shortly there after (it can take up to 2 weeks, before the number could be used to file your taxes).
When does the TIN come into Play in Business
Once you have a TIN number, if your company engages to work with other companies online, you will provide your tax identification number for tax identification reasons sometimes in an online form and sometimes you will be asked to submit a W-9(download copy of W9 form from IRS).
If your company earns an amount over the minimum amount for the year, your company will then receive a 1099 with an earning report linked to your TIN number, which you will then be able to report on your taxes in Schedule C.
This protects your social security number. You do not have to enter a SSN online as you do business with other companies (standard in many online relationships and profiles).
As you begin to organize and run your own business, you will find a large number of benefits in write-offs & tax deductions of legitimate business expenses that you will incur in the course of doing business, such as:
- Your monthly internet expenses
- Your mobile & business phone
- business related purchases of computers, hardware, software, online services and accounts
- business related travel, meals, entertainment expenses and much more
- business travel, mileage
- home office or coworking expenses
- online professional services
We do recommend that you consult with a tax consultant and an attorney if and when you establish your business, but that may not preclude you from making the choice to protect your identity now.
The IRS Online application is available during the following hours:
- Monday – Friday 6:00 a.m. to 12:30 a.m. Eastern time
- Saturday 6:00 a.m. to 9:00 p.m. Eastern time
- Sunday 7:00 p.m. to 12:00 a.m. Eastern time
As an educated and trained accountant with a double major in accounting and finance and a master’s in law in international taxation, I use the methodology myself.
Plus, I use H&R Block to file my taxes + Godaddy Bookkeeping for profit & Loss and automated Schedule C’s + Freshbooks for estimates, time tracking, secure online invoicing and this covers all of my small business accounting needs.
Want to learn more? scroll just a bit further… 🙂
Small Business Taxes
As I write this update and I’m still using Godaddy Bookkeeping (formerly Outright before they were bought) to keep track of my business books. Life is easy that way. 🙂
When I file my business and personal income taxes, nothing could be easier for me now since I Godaddy Bookkeeping automates the majority of my book work.
I do like doing taxes. I even worked for H&R Block preparing tax returns in the 90’s after getting out of the military.
These days I use H&R Blocks software to file my own taxes. There are two ways of doing this. You can complete your return online through them, or you can pay a few extra bucks, download the software and do the same thing. I generally download it. I personally prefer having the software on my machine. I also help my in-laws prepare their taxes as well and with the software package I get, I am allowed to file up to 5 federal returns when I get the software. Regardless, do not pay the full price. If you click the link/image below you will see the discounted price for H&R Block whether you fill your return out online, or buy and download the software.
Invoicing in the Old Days
I used to feel that PayPal Invoicing services were invaluable before I found Freshbooks which charges a small monthly fee. 🙂 This is not an endorsement, just a statement of what I use although I have written other articles where I guess I do endorse them! I used to use Quicken and TurboTax, but not for several years.
*** Yes I know that TIN Number is a bit redundant and like saying Tax Id Number Number. Semantically, I just like the sound of TIN number better than TIN all by itself. After all, I’m talking about tax and business and sole proprietorships not Tin Cup.