Author Topic: Multiple Streams of Side Income -- Multiple Sole Proprietorships? Same SEP-IRA?  (Read 562 times)

chuckster

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I'm curious about my options dealing with multiple streams of side income.

I have a "real job" as a W2 employee that accounts for 95% of my income. For round numbers, let's say this job pays $100,000 a year.

For a few years I've also been earning a little side income in my sole proprietorship, let's say $3000 a year. This is reported on a 1099-NEC for Non-Employee Compensation. I have a federal ID number for this proprietorship and have been contributing a portion of this income into a SEP-IRA in my name.

In 2020, I've also started earning cash (paypal/online) income in a completely unrelated field, say another $1500 a year.



With the second income stream, can I call this the same sole proprietorship? I think because it's in a totally unrelated field, the answer is No? Do I need to establish a second sole proprietorship for this income, second Federal ID, etc?

And, whichever way it goes on the first question, can I contribute to the same established SEP-IRA with this second income stream? Or do I need to establish a second SEP-IRA in my own name identical to the first, but only with the contributions I can make based on the second stream (about half as much as the first)? I'd like to shelter a little bit of this income as I am hoping that it will grow in the future to become a worthwhile amount (although it will always be a sole proprietorship, there is no way this will ever become a business with employees).


Thanks!

Paul der Krake

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There is no restrictions on the kind of businesses your sole proprietorship can engage in. If you want to be a fortune teller on Monday and sell tacos on Tuesday, go right ahead. In fact, the IRS will only issue one sole proprietorship EIN per natural person.

SeattleCPA

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I'm not sure about the only one EIN for an individual. That may be true. But it doesn't sound right.

If you have multiple sole proprietorships (taco truck, freelance programmer, carpenter, BnB, etc), you're actually supposed to file multiple Schedule Cs. Obviously some of the info would be appearing on every Schedule C (like your SSN, name, etc). But it seems odd you'd use the same EIN if the different sole proprietorships had employees or was issuing 1099s, etc.

BTW, for pension purposes, all of the businesses you own are treated as one employer. So you're going to need only one SEP-IRA.

chuckster

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Thanks for the replies!

Neither proprietorship has any employees (or ever will) it's just me. I just receive one type of income on 1099s from Side Hustle A and other income in cash/paypal from Side Hustle B. I don't issue any paperwork.

Appreciate the insights :)

Paul der Krake

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I'm not sure about the only one EIN for an individual. That may be true. But it doesn't sound right.
This is what I get when trying to obtain another one online:



Obviously for other structures you can have as many as you want. It's just a sole proprietorship limitation.
« Last Edit: January 18, 2021, 10:52:35 AM by Paul der Krake »

katsiki

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I'm not sure about the only one EIN for an individual. That may be true. But it doesn't sound right.
This is what I get when trying to obtain another one online:



Obviously for other structures you can have as many as you want. It's just a sole proprietorship limitation.

Interesting.  Chase must have asked for that to limit bank bonuses for "businesses".  :)

SeattleCPA

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@Paul der Krake you are obviously right. Thanks for pointing that out.


dizzy

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Hey I just happened to follow up with my old question about this a while ago.  Sooooo, does that mean I can sum up all my self-employed businesses in determining my solo401k contribution?  I don't have a normal 401k from a W2 job.