EIN vs. SSN

Nope, but it cannot hurt to enter the EIN on the Sch C.

Yup.

Several reasons, including:

i) Some people do not want to give out their SSN when filing a W-9 etc, so you can give your EIN instead.

ii) If your Sch C sole proprietorship hires any emmployees, you will need to use the EIN on their W-2s.

You definitely should use, on the Schedule C, the EIN that is associated with the retirement plan to which the Schedule C profit contributes. In theory, the government reconciles this with the 5500's, which have only the EIN (not the SSN) on them.

Steve

It is my understanding that a 5500 is necessary only when the balance in the 401(k) exceeds $250000.

However, that will never occur as I will be using the 401(k) as a conduit to convert to a Roth. Only residual interest might remain.

For example, if my Schedule C income is, say, $60000, I would:

1. Contribute 000 to the 401(k), i.e., 000 + 25% of 000.
2. Immediately convert the 000 to a Roth. Timing might result in residual interest being earned in the Roth, which I would convert before year's end to the Roth.
3. Since the income is low enough, I would also contribute 00 to the Roth.
4. Tax on 000 would be 181.25.

I'd be using $54181.25 of the $60000.

Why would I want a W-9?

I am not planning on having other tha Me, Myself and I.

It's something your clients give to you before they start paying you for services. If you don't supply a tax ID (SSN or EIN), they have to do backup withholding on payments to you over $600 for the year.

-Mark Bole

That's not how the math works. You should spend more time researching IRS Pubs or your tax software to see how this calculation is made.

To a Roth *what*? IRA? Roth 401(k)?

I can't easily see where these numbers are coming from.

-Mark Bole

Good. However, there is no downside to putting the proper EIN number on your C. Eventually, some auditor may audit your plan, even if you never had to file 5500.

You're working with a relatively new (2007?) concept in qualified plans, the concept that the assets within the plan can be sucked out into a Roth almost in real-time. There is no history here. This is not a retirement plan board, but even if you go to one of those (email me if you don't have that information), I am guessing nobody there knows about your situation either.

Steve

Only income would be from sale of software.

I'm assuming the $22,000 is coming from the $16,500 plus the over-50 catch-up contribution? If so, that stands (unless you've already made

But the rest is wrong for a sole prop.

First, you have to subtract off the adjustment for income for half the SE tax. $60,000 * 0.9235 * 0.153 * 0.5 = $4,239

So the amount the profit-sharing contribution is based on is $60,000 - $4,239 = $55,761.

Then you have to reduce the amount the profit-sharing contribution is based on by the amount of the profit-sharing contribution (yes, it's recursive). The net result is that the contribution percentage ends up being 20%, not 25%.

So the max profit-sharing contribution is 0.20 * $55,671 = $11,134.

Giving a total max solo 401(k) contribution of $33,134.

-- Rich Carreiro snipped-for-privacy@rlcarr.com

| On 5/9/2010 20:48, Mark Bole wrote: | > It's something your clients give to you before they start paying you for | > services. If you don't supply a tax ID (SSN or EIN), they have to do | > backup withholding on payments to you over $600 for the year. | | Only income would be from sale of software.

In my experience selling software, some companies (especially quasi- government entities like state schools) think they need a TIN of some sort even when there aren't services involved. In a couple of years if the new rules go into effect they will finally be right about this, so you might as well be prepared. :)

Dan Lanciani ddl@danlan.*com

The software will be sold only via credit/debit cards to individuals.