Tax ID Number/Making Profit

[hitec4you]

What is TIN and EIN?

[CobyPhoto]

Originally Posted by hitec4you

What is TIN and EIN?

TIN = Tax Payer Identification Numder - FEDERAL! IRS

EIN - Employeer Identification Number

You do not want to get an EIN unless you plan to employee persons in your business! There is a mess of forms and paperwork dealing with EIN's you file and it is not required unless you have employees and withhold money from their paychecks that you in turn have to pay to the government.

It all depends on how you file your income taxes as to the TIN. Consult a CPA for your taxes and this will all be taken care of for you.

There are benefits both ways. I had two bankers tell me they could use a DBA and my social security # but the would not do it if they were opening the account. They both said keep personal personal and business business. Even though the IRS could look at both from a tax perspective if you keep everything filed under your business then they are not looking over your personal returns when they have questions about your business finances and your social security# is not co-mingled with your taxes for your business which could get confusing if you happened to be audited.

While I understand this and agree, it is really quite pointless, as most sole proprietorships and partnerships (general), income from your business is reported on your PERSONAL 1040. It really makes no difference. Further, most banks will require you, personally, to sign and guarantee any line of credit, credit card, loan etc. that is made to a sole proprietorship or partnership so you are in fact personally resposible for the debt should your "company" default. 99% of the banks out there do this or else they won't loan either form money.

Just keep detailed records and ALL receipts and you will be in good shape. If you don't hire a CPA or Bookkeeper (familiar with all these issues) to do this on a regular basis, it is something you might want to consider, depending on the complexity of your business.

Again, consult a CPA or qualified person as to what you need to do for your business and the way it is structured.

CJ

[wjmphoto]

Originally Posted by misscrystaldawn

I hate to keep bringing up questions, and I swear I'm semi-intelligent...
When I apply for the Texas Tax ID, do I also need to apply for a Federal Tax ID through IRS. I tried visiting their website, and I couldn't find any info. My plan is just stock photography, and maybe selling prints if I get accepted into any artist shows.

If you are not incorporating and don't plan to, then just get a DBA at the local county clerks office. I think it's $10. Once you have that you can get an EIN for the sole purpose of opening bank accounts and still file under your SSN via a schedule C on your taxes.

When you go online and fill out the IRS form, one of the questions it asks is why are you requesting the EIN and one of the answers is for banking purposes. The Feds are well aware of the fact that some banks require an EIN to open an account and are more than happy to give the number to you for that purpose.

[esi7esi7]

Assuming you form a sole proprietorship (from what you posted this option makes the most sense)....

1. Go to the local courthouse and get a DBA under the business name.
2. Apply for a Texas sales tax permit. Attend one of these seminars on sales tax for businesses.
3. Open a separate account for your business expenses. This is technically not really required, but it is strongly urged for good accounting practice. Most banks require a copy of your DBA. Use your SSN (no EIN req'd) as long as you meet these requirements. All business related expenses should go through this account.

Filings:
1. Texas Sales Tax Return: File your yearly tax return by Jan. 20th. This is under the assumption you will not pay more than $1K in taxes per year. If your sales/tax surpass this mark, you will have to file more often ( ie monthly, quarterly). This MUST be filed even if you make $0.
2. Income Tax Return: File this by April every year. You will use the Schedule C form along with your typical 1040.

Somebody correct me if I'm wrong here...I think your best bet is to pay a good CPA for some advice.

[arcproducts]

Lisa,

Nice summary you put together. All seems in line to me. My husband and I have been self employed for 17 years (not photography) and incorporated about 10 years ago. So we have so been there done that and it is confusing for those starting out. It sure can be intimidating.

The strongest recommendation I can have is as noted above - - SEPARATE ACCOUNTS - SEPARATE ACCOUNTS - SEPARATE ACCOUNTS. We did this when we were operating under dba and it makes things much easier to track. We even took it a step farther and have 2 credit cards we use. One for personal expenses and one for business. That way when the statement comes in that makes it easier to reconcile as well. This would be an easy step to start at the beginning and I believe it pays off.

Sometimes people starting out with new businesses get confused with the sales tax issue vs income tax etc. Regardless, small businesses are hit with all kind of taxes left right and center.......

Good luck to Crystal starting out. Remember 'the cup is half full' ..... if you set your sites and work it, you will be successful at your photography venture.

[LadyShutterBug]

WAMU will also do a business account with a DBA and no EIN.