What are EINs and 1099s?
Watch on YouTube
Listen to the Episode
Recently I’ve seen many questions about EINs in the Facebook groups I’m in. In this episode, I talk about what is an EIN and why you would use one, even if your publishing company is setup as a DBA. I also cover what 1099s are and if you need to issue any to your vendors. This info only apply to the US, and is not tax advice.
Download your free EIN Application Guide. It shows you how to fill out the application form to obtain your EIN.
Do you have additional questions about EINs, 1099s, or anything else about indie publishing? My Micro Coaching may be what you need! 10 minutes for $10!!
Learn more about Indie Publishing the business of being an author, purchase the book: Business and Accounting for Authors
Support the Show!
If you’d like to support the show, you can donate to buy me a coffee at buymeacoffee/IABG. These donations help support the cost of hosting, editing, and production of the podcast.
Transcript – Episode 09
Hey, fellow indie authors, welcome to this week’s episode of the Indie Author Biz Guide Podcast. Recently, I’ve seen many questions about EINs in several of the Facebook groups that I’m in. In this episode, I talk about what is an EIN and why you would use one even if your publishing company is set up as a DBA.
This information only applies in the United States and it is not tax advice. This is for educational purposes only just to give you some more information for you to make what decisions are right for you and maybe talk to your accountant about.
Listen to the end for free resource that you can download to help you in your indie author business.
Welcome to the Indie Author Biz Guide Podcast. I’m Tora Moon, genre bending fantasy and sci fi author, indie business author, and entrepreneur. Here we talk about the business of self-publishing, or as I prefer to call it, indie publishing. As an indie author, you have entered the wonderful world of entrepreneurship. On this show, I guide you through the rocky waters of the indie publishing industry.
I share business basics and principles you can apply to your author business, really, any business. Other indie authors share their experiences and expertise to give you insight in your career and build your business. You can download your free indie author business checklist, find additional resources, and the show notes at Indie Author Biz Guide dot com. And now, here’s today’s episode.
What is an EIN?
You may be wondering and asking yourself what is an EIN? What do I use it for? And do I need one? Hopefully, this episode will answer those questions.
Now the EIN only applies to U.S. companies. If you’re outside the U.S., this may be just interesting information or we’ll see you on the next episode.
What is an EIN? It means employer identification number. Don’t let the employer fool you. It’s more than if you have employees. What a EIN number is, is your business identification number for tax purposes. It will identify your business to all of the tax authority and agencies. If you should happen to have employees in the future, you’ll use this number to file your payroll tax returns. But you also use this number on all of your other tax information as well.
And it’s a must for partnerships, LLCs, and corporations because you don’t use your Social Security number to identify those types of entities because they’re outside of yourself. However, they are available to DBAs. I didn’t know this for a while and it’s like. “They are? What the hell have I been doing using my own Social Security number?” And I haven’t looked back since. And I’m a serial entrepreneur, so I’ve had several businesses. Now I always get an EIN for my DBAs.
Why Should You Obtain an EIN if you have a DBA?
Why should you get one if you have a DBA? One of the benefits that it does is whenever you have to fill out your tax ID information at any of the retail sites or wherever, and you know that’s everywhere, instead of using your Social Security number, then you would use your EIN number all those W9s. And that way you’ve added some anonymity and distance to yourself a little bit from your business.
And it’s better security for tax fraud or I.D. theft if you’re using your EIN instead of your Social Security number. Yes, most of these places are secure. There’s always data breaches. I’d rather have my EIN number out there than my personal Social Security number.
Where to Use your EIN
When you set up your account with Ingram Spark, or KDP Print, or KDP, or Draft to Digital, or if you go direct with Kobo or Apple or Google Play, or even if you set up like a PayPal account, they always ask for your tax I.D. information and have you fill out what’s called a W-9.
And a W-9 is like a W-2, but it’s for businesses instead of individuals. And this will be your tax ID number on record with that company. When they send 1099s at the end of the year, that’s the number that will be on your 1099 is your EIN number if you gave it to them.
Another place where you would use your EIN number, say you go down to a local shop, you’ve written a book that is set in the area and it would be really nice to be selling it to local people or to tourists or whatever. You wrote a hiking book about the trails in the area. A lot of those stores won’t buy your book outright. They’ll take it on consignment, which basically all bookstores do. When you do that, then that local shop, if you sold over $600, will need to give you a 1099. So they need your tax I.D. number. You would give them your EIN instead of your Social Security number.
What are 1099s?
Now, while we’re talking about 1099s, and as I’m recording this at the end of January, you’ll be thinking about 1099s, we’ll cover a little bit about 1099s. A 1099 is issued by someone who paid you over $600.
If you paid an editor over $600, you would need to send them a 1099. There’s a caveat to that as well. If you used a PayPal account or paid for it via a credit card, or even your debit card is counted as a credit card in this instance, then that’s a third party payer. You would not have to issue a 1099. It would only be those payments by check or direct deposit that you would need to issue a 1099 for. On the receiving end…
Remember, even if you do not receive a 1099 from somebody, it’s your responsibility as a business owner to report any income that you receive on your business tax return. It doesn’t really matter if you get a 1099 or not. If you receive the money, you need to report it.
There’s going to usually be a difference on the 1099 amount that you receive from the distributors that you use to distribute your book like Amazon or Ingram or Draft to Digital, that is because 1099s are issued on a cash basis.
They pay 60 days after the sale. That means that the money that they send you from January to December is what they’ll report on your 1099. But those are not your January to December sales. Those are actually your November to October sales. All of the accounting software programs can convert from accrual to cash basis, so you can do a reconciliation.
Even so, remember what I said earlier that what is on that 1099 is not gospel.
You report what you received. You report what’s on your accounting. If it’s off or not the right amounts, those are information returns to the IRS. The IRS is using those to make sure that income is being reported when it’s supposed to be reported.
Your EIN on your Personal Tax Return
As a DBA, you will be reporting your income and expenses for your business on a schedule C, part of your 1040 individual tax return. Where you will see and use your EIN number, there is a space on that schedule C where you enter your EIN number. That’s how you get your EIN number on your personal tax returns.
Your EIN number is linked to your Social Security number. And this is good to know because if you have more than one DBA, which I do, then that EIN number applies to all of your DBAs because you’re reporting it all on one tax return. If you have three DBAs, then you will have three schedule C’s in your individual tax return.
So what happens if you used your Social Security number instead of your EIN number when you set up an account? Nothing. Because your EIN number is linked to your Social Security number, there’s not going to be a problem. You set up your PayPal account using your Social security number because you didn’t have an EIN number yet. Fine. That information will just be sent to you and you’ll report it on your schedule C. It’s all the same money. It’s all the same bucket. So don’t stress about it.
The EIN is to help you so your Social Security number isn’t splattered all over the Internet. If you have employees, you will use it for your payroll tax returns. For most authors, that isn’t going to happen for a while if you’re just starting out. Maybe if you are to that point and you’re deciding whether to hire an employee, then you will have to get an EIN if you haven’t got one already for your DBA.
Now, I do talk about EINs in my book, Business and Accounting for Authors, that you can get in e-book, print, or audiobook, and just about everywhere, and I do have them on my website. And as part of the appendix of this book is how to fill out EIN.
I have also included the instructions on how to fill out an EIN for an indie book publisher, like yourself, as a DBA in my resources section on my website. Go to Indie Author Biz Guide dot com forward slash resources to download that.
And if you have additional questions, maybe book some micro coaching with me. You get 10 minutes of coaching for $10 and that’s asynchronous coaching. I use Volley, which is like Voxer, only we can use video, audio or text and communicate that way. If you have a few questions that might be helpful to get your questions answered in a timely way, is just book a micro coaching session with me.
I hope this has cleared up some of the confusion about what an EIN number is and how you can use it with your doing business as publishing company. Hope you have an amazing day and we’ll see you again on the next episode in which we’ll talk about sales tax.
Thanks for listening to this episode of the Indie Author Biz Guide podcast. I hope you found value in it.
You can get your free business checklist, find more information, and any downloads mentioned at Indie Author Biz Guide dot com forward slash podcast.
Please like and subscribe and tell your indie author friends about the show.
If you’d like to support the show, you can donate to Buy Me a Coffee, at Buy me a coffee dot com forward slash IABG. These donations help support the cost of hosting, editing, and production of the podcast.
Thank you, and I hope you have an amazing day!