SSN or EIN on W9?

[L]

This might be a silly question, but appreciate any wisdom.

My spouse is starting a per diem job, for which she gets a 1099. She has another w2 job., but no retirement plan available to her. I was hoping to start a solo 401k for her

When they give her a W9 for the new job, should we just use the SSN ? Or, would a EIN be required to do this? Thanks for any help!

[Peds]

Doesn't matter. May as well be an ein.

[DavidGlennCPA]

SSN works great.  You'd only need an EIN if you want to open a business checking account or use an LLC for her sidework.

You'll need an EIN for the solo 401(k) but that would not be the EIN you put on this W-9.

[L]

Thanks!! that was my question.  So if a have 1099 income under a SSN, I can still start a solo 401k and that would require it's own EIN.  The 1099 income and solo 401k should never be under the same EIN? (that was my confusion)

[jfoxcpacfp]

Option 3 here...Whenever possible, I avoid giving out my SSN - to anybody - and recommend clients invest the 3 minutes necessary to obtain a free EIN. Just never know what data breach may make its way into your personal information that may be floating around databases connected to the internet.

Is it probable you’ll be impacted? imo, absolutely not. But if it increases the risk even minutely and the cost is close to nil, why take the chance?

[L]

The identity theft point about the SSN is a great point.  We'll just use an EIN then.

[spiritrider]

The simple answer from the W-9 instructions; "If you are a sole proprietor and you have an EIN, you may enter either your SSN or EIN."

@jfoxcpscfp is correct. If you get an EIN for a sole proprietor and use that on the W-9. This avoids giving your SSN to clients. If you do this you will want to include the EIN on your Schedule C to match up with the 1099-MISC reported TIN.

The EIN and a one-participant 401k is a more nuanced issue than @DavidGlennCPA stated:

• The administrator of the plan does need to report its EIN on Form 5500-EZ when the plan balance is > $250K on 12/31 or on other forms or communication with the IRS about the plan. However, if the administrator of the plan is defaulted to the employer or specifically identified as the owner of a business taxed as a sole proprietor. You can use the employer's EIN for all plan filings. For example, both lines 2b (employer) and 3b (administrator) can be the sole proprietor's EIN.


• A separate EIN for the administrator is only required for a one-participation 401k and/or:
  
  
  
  • Technically, if an S/C Corporation identifies someone or some other business as the administrator. Even the owner of an S Corporation is separate from the S-Corporation and needs a separate EIN. Actually, this is seldom done, and I never heard the IRS raise this as an issue.
  
  
  • There is no separate trust required for a one-participant 401k plan, but custom one-participant 401k document providers seem to be requiring it now.
  
  
  
  

Bottom line: A sole proprietor should get an EIN for the W-9 and also use the same one for their Schedule C and can use the same one for a one-participant 401k.

[DavidGlennCPA]

@spiritrider - Can you clarify you answer about using the same business EIN for the 401(k) plan?  I'm not seeing this distinction very clearly between needing a separate EIN for the solo 401(k) plan or not.

1. What about someone using an S-corporation?  Can they use the S-corporation's EIN for their solo 401(k)?


2. What are some instances when you do need a separate EIN for a solo 401(k)?

I see what you're saying about Form 5500-EZ and about the solo 401(k) not needing to name a plan trustee.

Here's the conflicting information I'm finding -

When applying for an EIN, you have the option of getting an EIN for a 401(k) plan as shown here: https://www.mysolo401k.net/ein-number/.  There are EINs issued just to 401(k) plans based on the EIN application page.  And the people at this site say to get a separate EIN for the 401(k).

This author also says to get a separate EIN for the 401(k) plan: https://www.emparion.com/hrf_faq/solo-401k-ein-tax-id/

What's the distinction between what they're saying and what you're saying?

[spiritrider]

A business taxed as a sole proprietor does not need a separate EIN for the plan. Unless they have a separate trust such as some custom one-participant 401k plan document resellers seem be be now asking for.

An S-Corp can use the same EIN as long as the employer (S-Corp) is the administrator. If you name the S-Corp owner on the one-participant 401k plan adoption agreement. You should have a separate EIN for the plan. The same is true for separate trusts. I think it is a good idea for an S-Corp to use a separate EIN regardless.

This is clearly not something that the IRS is focused on. I'm sure most one-participant plans use the businesses EIN regardless of the circumstances.

My MySolo401k is one of the resellers I alluded to who ask you to get a separate trust even though it is not required in a non-ERISA 401k plan. So in their circumstances they are correct you need a separate EIN. However, they do not have a deep knowledge of 401k plan compliance. I have found 10-12 errors in their website content. They provide no guidance on the complex contribution limits applying to lower amounts of self-employed earned income with employer contributions and employee after-tax contributions.

They even advised a potential client that they could amend their one-participant 401k to MySolo401k's plan document after the tax year and make after-tax contributions for the previous tax year after doing this. When IRS regulations explicitly prohibit any 401k plan amendments prior to 1/1 of the current year that change the benefits available to plan participants.

I have never heard of Emparion. By their own words, "EMPARION, LLC IS A RETIREMENT PLAN DOCUMENT PROVIDER." Could be someone in their parent's basement for all I know. As to heir statement; "The solo 401k is classified as a retirement trust." Actual independent "trusts" are only required in ERISA 401k plans. A one-participant 401k and all other employer retirement plans covering only owners and optionally their spouse are non-ERISA plans.

Fidelity and Vanguard use their own trusts for their one-participant 401k plans and act as the trustee. Etrade, Schwab and TD Ameritrade default to no trustee, although you can name yourself or third parties as trustee.  At all of these one-participant 401k providers, the adoption agreement requires an EIN only for the employer of the plan.

You need to be careful what information you rely on from the internet. In many cases it may be misleading or incomplete. I certainly wouldn't rely on information from those two sources. By the way that includes myself and any other WCI forum members. I have been wrong in the past and and sure I will be in the future.

I am confident on this issue based on ERISA applicability, IRS guidance, IRS publications.  However, as you know, there are many gray areas in tax related issues and sometimes you must use inference, because there is no "smoking gun" reference.

[DavidGlennCPA]

Thanks for clarifying.  Agreed on the being careful about what to rely on.  I shared those as discussion points for you to distinguish what you're saying.

Emparion is run by a CPA in Arizona who I've spoken to a couple of times.

On some level this seems like a distinction without a difference but I see the points you're making.  I plan on digging into ERISA section 403 to understand the topic better.

 

[spiritrider]

In actual practice which EIN probably is a distinction without a difference. I have never heard of the IRS raising an issue.

They are more worried about significant operational errors such as eligible non-spouse employees in a one-participant 401k, failing to file Form 5500-EZ when required, etc...

[G]

L wrote:

This might be a silly question, but appreciate any wisdom.

My spouse is starting a per diem job, for which she gets a 1099. She has another w2 job., but no retirement plan available to her. I was hoping to start a solo 401k for her

When they give her a W9 for the new job, should we just use the SSN ? Or, would a EIN be required to do this? Thanks for any help!

Click to expand...

Great user name.

Thanks for posting this question.

[PhotonsRGR8]

Equally silly question. What is advantage of solo 401K over SEP IRA for 1099 income if physician has LLC. Asking for a friend.........

[Peds]

Backdoor rIRA. Higher contribution limits.

[L]

Peds is right. But just more detail in that if you have any money in a pretax IRA (SEP, simple, traditional), you are subject to the pro rata rule when doing a backdoor Roth. This basically throws a wrench in it

If you have a solo 401k, you can transfer all your IRA money into that account, so you can do a backdoor