| As a small business person-slash-advice
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| | painless task. You can apply online at
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| columnist I dread the first quarter of
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| | the IRS website (irs.gov), apply by mail
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| the new year. Not because in my mind my
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| | or telephone, or if you do business in a
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| own business fortunes start at zero again
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| | state that participates in the Federal
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| every January or because I have already
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| | Employer Identification Number project
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| dismissed every New Year's resolution I
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| | you can apply through you local IRS
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| made when the clock rang out the New
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| | office (sorry, Alabama is not one of
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| Year.
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| | them).
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| No, the reason I dread the first quarter
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| | You will need an EIN number prior to
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| of the new year is that my email box
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| | filing business returns with the IRS, so
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| floods with questions about business
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| | make sure you give yourself plenty of
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| taxes and the IRS, my two least favorite
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| | time to obtain one. For more information
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| subjects on earth. It's not that I am
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| | on EINs and your business, consult your
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| opposed to paying my fair share of
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| | accountant.
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| business taxes. It's that I consider the
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| | And while we're on the subject ...
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| IRS to be a little like Beetlejuice, the
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| | Q: I made extra money selling things on
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| movie demon who appeared only after his
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| | eBay last year. These were items I picked
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| name was called three times in a row. My
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| | up at yardsales mostly. My husband says I
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| fear is if I write too many IRS columns
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| | am responsible for paying income tax on
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| their dark agents may appear on my
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| | the money I made, but I disagree. This is
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| doorstep, ready to drag me away to an
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| | just my hobby, not a business. What do
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| uncertain fate.
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| | you think? -- Gladys A.
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| Oh well, one must do his duty no matter
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| | A: With so many people selling on eBay
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| the consequences, so here we go....
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| | these days this is a question I get quite
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| Q: I am starting a small retail business.
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| | a bit. In fact, I have plans for a future
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| While talking to a potential supplier
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| | "eBay and taxes" column, but I believe
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| last week he asked for my EIN number. I
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| | your question is more, "is it a hobby or
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| had no idea what he was talking about, so
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| | is it a business?"
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| I told him I would have to get back with
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| | Again, I went to the horse's mouth (at
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| him because I didn't have the number
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| | least I think it was the mouth) for the
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| handy. What is an EIN number and why do I
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| | answer. According to the IRS there are a
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| need one? -- Robert P.
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| | number of factors that help determine if
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| A: Robert, do you remember the old Johnny
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| | your hobby can be considered a business
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| Rivers song "Secret Agent Man?" There was
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| | and thereby make you susceptible to the
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| a line that said, "They're giving you a
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| | IRS tax rules governing business.
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| number and taking away your name." An EIN
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| | Do you carry on the activity in a
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| isn't as cool as a secret agent number,
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| | business-like manner? If you conduct your
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| but it works much the same way when it
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| | eBay activities like a business, i.e. you
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| comes to your business' relationship with
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| | keep business records, track your profit
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| the IRS. Instead of identifying your
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| | and loss, keep a separate checking
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| business by name, the IRS identifies your
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| | account, etc. then whether you think so
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| business by EIN.
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| | or not, your hobby is considered a
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| EIN stands for Employer Identification
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| | business.
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| Number and is also known as a federal tax
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| | If you put considerable time and effort
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| ID number. The EIN is a nine-digit number
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| | into your venture, the IRS may contend
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| that the IRS assigns to businesses and is
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| | that you do so for profit and not fun. It
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| used to identify taxpayers that are
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| | seems the folks at the IRS don't believe
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| required to file various business tax
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| | in doing things strictly for pleasure. My
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| returns.
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| | guess is, neither do you. If you weren't
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| Does your business need an EIN? According
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| | making money selling on eBay I doubt
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| to the IRS the answer is yes if:
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| | you'd be bothering getting up at 4am to
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| · Your business has employees
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| | hit all those yardsales. Then again,
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| · Your business is a corporation or
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| | maybe you would...
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| partnership
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| | If you depend on income from your eBay
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| · You file returns for Employment,
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| | activities for your livelihood, it's a
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| Excise, or Alcohol, Tobacco and Firearms
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| | business, not a hobby.
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| tax
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| | There are a number of other factors the
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| · You withhold taxes on income (other
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| | IRS considers to determine if a hobby is
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| than wages) paid to a non-resident alien.
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| | really a business, but in your case I
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| · Your business has a Keogh plan
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| | think that covers the basics.
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| · Your business involves trust, estate,
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| | For detailed answers to any tax question
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| real estate mortgage investment conduits,
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| | you should consult a qualified accountant
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| non-profit, farmers' cooperatives, or
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| | or tax attorney. God forbid you rely on a
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| plan administrators.
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| | guy who is afraid to mumble the letters
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| Applying for an EIN is a relatively
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| | "IRS" three times in a row.
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