Your social security number is "you central" to the government, creditors, and identity thieves. And now you're asked to give it out to online publishers and other entities when setting up your self-publishing business? Yeeks! But don't worry. There's an alternative. It's called the EIN, or Employer Identifier Number, and you don't have to have employees to use it. Here are the what, why, where, and how to get free EIN.
Basically, the EIN replaces your SSN and you can use it for business purposes. This makes it very easy to separate out your business from personal expenses at tax time. Yay!
What you'll learn in this post
In this post, you'll learn:
- What is an EIN
- Where to apply for a free EIN
- Why use an EIN
- What EIN name to use
- What are some misinformation about EIN
- What is the importance of getting EIN
But first, what is an EIN?
Like your SSN, the EIN is just another TIN (Taxpayer Identification Number). When you use an EIN for your publishing business, it. makes it very easy to separate business from personal expenses at tax time. Yay! For a really thorough description of the EIN see IRS publication 1635.pdf.
For example, when you search for EIN, here’s what your Google results may look like. (The red Xs and check mark are mine.)
Where to apply for a free EIN?
Predictably, there are several unscrupulous agencies that will offer to save you the trouble of obtaining an EIN by doing it for you, for a price. Ha! You can't fool me! These agencies have great SEO (Search Engine Optimization) and they often appear above results for the IRS's website. They also mimic the look and feel of the IRS site. Many unsuspecting small business owners are lured into their clutches. Don't be one of them!
So, when you google, be sure to click on that irs.gov link buried under the other services that will charge you for it.
Why use an EIN?
Just in case you’re not already convinced, let me count the reasons you should obtain an EIN.
- Avoid spreading your personal tax ID around the internet.
- Separate your business from your personal expenses.
- You need one if you are ever going to employ somebody.
- It's really easy and fast using the online forms.
- Your accountant will love you.
- It’s free.
- If you’re a foreigner selling books in the US, it helps prevent you from being double-taxed.
Using your name or a business name
Independent authors are often encouraged to create a business or publishing house name (your publisher imprint), however, you can obtain an EIN in your own name. If you have already decided on a publishing house/imprint name, and have applied for a Fictitious Business Name (FBN) and obtained DBA (Doing Business As) in your county, you may use the DBA, instead.
A note for authors living outside of the USA
Until recently, authors living outside of the US had to obtain an EIN to avoid being taxed 30% on royalties earned in the US. That’s no longer the case, but there’s so much misinformation on the internet today that I feel obliged to clarify. If you are selling books in the US but you don’t live in the country, you do not need an EIN any more but you do need to apply for ITIN (Individual Tax Identification Number) using Form W-7. You’ll also need to complete a W-8BEN form, which allows distributors to pay your royalties without withholding taxes as specified in the tax treaty for your country. Some companies, such as IngramSpark and Amazon, will automatically pop the W-8BEN form up when you need it during the publishing process. For more information check Smashwords’ checklist of the steps you need to take. You can use roughly the same procedure for other distributors and vendors.
Your first step to doing business as an author
Obtaining an EIN is a good first step to doing business as an author. It’s easy and it’s free, and it keeps your business expenses separate from your personal expenses. When tax time comes around, you’ll be ready to present your case as a small business with Schedule C. Obtaining an EIN will get you set on the right path to your career as a professional author-publisher.
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