Solo 401K, EIN, 1099s

[LinUSA]

Hello.

I am thinking about getting a Solo 401(k), and my understanding is that this will require me to have an FEIN. 

I currently do 100% 1099 contract work, and use SSN.

I believe I am considered a sole proprietor - I have no employees, and do all the work myself.  I file joint annual tax returns with my spouse whose income all comes from his employer on a W-2.

My hang up here is the FEIN. 

If I generate an FEIN through the IRS,  would I then need to issue myself (to my SSN) a 1099-NEC from my FEIN? 

How does switching from SSN to FEIN change my annual tax process?

Thank you so much for helping get me started.

[MinhT1]

The FEIN is only required in certain states when a sole proprietorship starts hiring employees.

As a sole proprietor, even if you do not have employees, you can choose to apply for an EIN which you could use to fill forms W-9 instead of using your SSN. Having an EIN does not change your tax filing obligations in any way.

As a sole proprietor, you do not pay yourself and do not issue form 1099-NEC to yourself.

For your information, please read this IRS document about the retirement plans for self-employed people.

[LinUSA]

Hi, Minh, and thank you for the reply and sharing the link.

It looks like in order to open a Solo 401k I would be required to get an EIN, regardless of state?  

If I do switch over to an EIN, I'm just not clear on how the EIN will link to my income when I file taxes using my SSN.

The only reason I would do the EIN is to have the ability to create the Solo 401k.

Thank you for any additional expertise you may have to share.

[ThomasM125]

When you prepare your schedule C to report your self-employment income, you will do so both under your social security number and also your EIN number. The EIN number will appear in box C but your social security number will appear at the top of the form.

So, the IRS will still credit your income and self-employment tax to your social security account, the EIN number is just there to link whatever reports your use it for to your schedule C.

[LinUSA]

Excellent information, Thomas!

I just downloaded the Schedule C and indeed see a space for the EIN and my SSN.

It sounds like getting an EIN really would not be too big of a deal or add much additional work to my regular annual return. 

I think I have just one follow up question then. When I set up the EFTPS for my quarterly estimated tax payments, it defaulted our account to my husband's SSN. Do you happen to know if this would still stay the same after I have an EIN created, since it seems like it will all just track back in the end to the Schedule C we send along with our taxes?

Thank you so much.

[DawnC]

All businesses receiving a new EIN (Employer Identification Number) are pre-enrolled in the Electronic Federal Tax Payment System (EFTPS) enabling you to make all your federal tax payments electronically. EFTPS is a free service provided by the U.S. Department of the Treasury. More information is available at www.eftps.gov.

The IRS will automatically created the new account which you can use for your business taxes when your application for the EIN is processed.  The EFTPS PIN package is mailed to your IRS address of record. (If less than 1 week since receiving your EIN) please wait, the PIN should arrive within 5 business days after receiving the EIN. If more than one week since receiving your EIN, call EFTPS Customer Service at 1-800-555-4477. 

[LinUSA]

Hello, Dawn! 

Since I already have an EFTPS account, do you know if the IRS would automatically link to my existing account, or would I end up with 2 EFTPS accounts?

Thank you so much for your response.

[ThomasM125]

You need to pay your estimated taxes in under your social security number, since you are filing your taxes on your personal tax return. So you would use your current EFTPS account. The new account will not be linked to another account.