Tax ID for survey income

[samdoc]

I am a W2 employee who cut down some hours and recently started supplementing income with surveys. I expect to make close to touch a 5 figure income this year. Should I file these earning as an individual or file with a separate tax ID. Can someone help with strategies to reduce tax burden since my primary W2 income doesn't allow for any wiggle room? Our CPA said just file it to my personal income under my SSN, and then we can deduct small expenses like laptop and internet costs, maybe a portion of licensing/certification costs. A colleague was advised differently and he has a separate EIN. This line of work does not require liability coverage.

[childay]

I am a W2 employee who cut down some hours and recently started supplementing income with surveys. I expect to make close to touch a 5 figure income this year. Should I file these earning as an individual or file with a separate tax ID. Can someone help with strategies to reduce tax burden since my primary W2 income doesn't allow for any wiggle room? Our CPA said just file it to my personal income under my SSN, and then we can deduct small expenses like laptop and internet costs, maybe a portion of licensing/certification costs. A colleague was advised differently and he has a separate EIN. This line of work does not require liability coverage.

You're going to need an EIN so you can set up solo 401k and contribute to that. Assuming you want to.

[Sampter]

You are hustling those surveys. I do them occasionally but are very annoying for me in general, especially as most of them don't work well on a phone. Do you get tired of them?

[samdoc]

childay I have a 401k which I max out from my primary job. I was told I cannot contribute more. Is that right? It is my understanding that I can do a Sep IRA (but forego backdoor Roth then), but not sure if the numbers make enough sense (I cannot possibly contribute more than I make).

Sampter I try to respond only surveys that pay well. Compensation and survey invitations also depend on your specialty. Some are really long and don't pay well. I have weeded those out, those are exhausting. I do a few surveys and then sometimes receive one-on-one invitations as follow up which pay better. It is still not close to my primary income, but since I have flexibility, some extra income is appreciated. Just trying to strategize taxes for the first time.

[childay]

childay I have a 401k which I max out from my primary job. I was told I cannot contribute more. Is that right? It is my understanding that I can do a Sep IRA (but forego backdoor Roth then), but not sure if the numbers make enough sense (I cannot possibly contribute more than I make).

Yes you can. You just have to contribute the "employer" portion

https://www.youtube.com/watch?v=cp9nzPuMYJ0

https://www.whitecoatinvestor.com/multiple-401k-rules/

Don't forgo roth for sure!

[jfoxcpacfp]

I recommend an EIN just to keep SSNs as private as possible. Some custodians don’t require an EIN for a solo-k, but I still recommend getting one.

Yes, you can have multiple 401k’s, you just cannot contribute as an employee more than the annual max ($20,500 in 2022). You can receive profit-sharing contributions from as many independent employers as you can manage to work for. The PS contribution for you is 20% * ((net profit from self-employment - (1/2 related FICA tax)).

Don’t use a SEP. Most CPAs recommend them b/c they are not as familiar with solo-k’s, but having a balance will cause your backdoor Roth conversions to incur pro-rata taxation. Most CPAs don’t know about those, either, though. You don’t have to “forego” a backdoor Roth, just understand that you will pay taxes on at least part of the conversion. But, as I’ve repeated ad nauseum here, that is not necessarily a bad thing, just anathema to the WCI crowd.

[samdoc]

childay thanks for the youtube link, the example was very helpful. If I understand this correctly, I am not sure if setting up a solo 401k and make an employer contribution makes sense; maybe if/when I bring in more, it is worth the effort.

jfoxcpacfp Great point about SSN privacy. I looked through links about getting an EIN:

https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online

Not sure why it is not working right now, will check during business hours. Do I need to set it up as an individual? Also, thanks for the clarification on backdoor Roth, I guess forego was not the right word. Any other suggestions on tax strategies for this year for this side gig?

[jfoxcpacfp]

Yes, you’ll apply as an individual. It’s always been odd to me that the EIN online site closes down outside of regular business hours. I tested it over the weekend to set up an EIN for a trust and had to wait till Monday. As far as tax strategies, there aren’t a lot for the amount of income you plan to generate. I like getting the solo-k set up now to serve as a receptacle if your need to r/o a plan from a former employer and don’t want to use new employer’s plan. Be aware that you must have the intent to continue your business, though (any kind of SE income), to keep the plan active.