Freelance - startup cost and SSN vs TIN

[lllaffoon]

Working on my daughter's taxesand have some questions.... she purchased a computer to do graphic design & took a course in the same to prepare for freelancing total was about $3k... these expenses were incurred in 2022 but she did not have income from freelancing until 2023.  (She did have W2 income in 2022.)   Also, when she first started freelancing she provided her SSN, but now would like to get a TIN # in 2023 so she doesn't have to give out her SSN.  

Questions:

(1) Should she claim her start-up cost for freelancing in 2022 even though she had no income from that business -or- can she claim it in 2023 when she has income from freelancing even though the expenses were incurred in 2022.

(2) in 2023 she'll likely have 1099-NEC's some with her SSN & some with her TIN... is that a problem?  Does she have to do it like a new business again when she gets her TIN?

(3) if we record her startup cost in 2022 and I use her name as the 'business name' on the schedule C, then in 2023 when she gets her TIN & decides on a name for her business & I use that name on the schedule C rather than her name, will that be a problem?

(4) I assume on schedule C we continue reporting it under her SSN as the only other number on the form is for an EIN which doesn't apply to her, she has no employees.  Is that correct?

(4) Will there be anywhere in Turbo Tax where we need to reference her TIN? 

Sorry for so many questions... just trying to get it all out there so I can move forward with her taxes.  I appreciate any input or advice.

Thank you!

[DMarkM1 · Accepted solution]

Questions:

(1) Should she claim her start-up cost for freelancing in 2022 even though she had no income from that business -or- can she claim it in 2023 when she has income from freelancing even though the expenses were incurred in 2022.

She will claim the start up costs on her 2023 return.  Start up costs are capital costs which are generally depreciated as an asset from the date the business starts.  However, up to $5000 of start up costs can be deducted in the year the business starts.  When adding expenses for the business next year you will find "Start Up costs" in the list of expenses in TurboTax.  Here is a link with more information on "Startup costs".

(2) in 2023 she'll likely have 1099-NEC's some with her SSN & some with her TIN... is that a problem?  Does she have to do it like a new business again when she gets her TIN? No, it will all be reported on a schedule C on her personal return.  She'll report all income for the business in the same business whether issued to her SSN or Business Employer Identification Number (EIN).  

(3) if we record her startup cost in 2022 and I use her name as the 'business name' on the schedule C, then in 2023 when she gets her TIN & decides on a name for her business & I use that name on the schedule C rather than her name, will that be a problem? See questions 1 and 2 above.  Report on schedule C on her personal return for tax year 2023.  Her SSN will be associated with her business EIN in the tax records.  

(4) I assume on schedule C we continue reporting it under her SSN as the only other number on the form is for an EIN which doesn't apply to her, she has no employees.  Is that correct?  No.  Once she has an EIN that is the business Taxpayer Identification Number (TIN) that will be input on schedule C.  They are all the same number.  

(4) Will there be anywhere in Turbo Tax where we need to reference her TIN?  She will be asked if she has an EIN that is sometimes called a business TIN; the same number.  

@lllaffoon 

[lllaffoon]

Thank you so much for all the great info!  I do have one more question (sorry).... she did send 'invoices' out in 2022 for work she did... but didn't receive any payments until Jan 2023.  I should have put the in my original msg.  Does that change anything?

[Vanessa A · Accepted solution]

No, if she did not receive any money until 2023, then it cannot be reported on her 2022 taxes, it has to be on her 2023 return.  Income is reported in the year received, not the year requested UNLESS she is using the accrual basis of accounting which most people do not.

If she is using the accrual basis of accounting (reporting income when earned/invoiced instead of when received) then she would report this on her 2022 return. 

[lllaffoon]

Great, thank you so much!