Author Topic: Report unrelated side income under business?  (Read 2339 times)

fiveoh

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Report unrelated side income under business?
« on: August 01, 2016, 08:09:23 PM »
I have a consulting business that I started a few years ago with an EIN.  This year its been really dead.  I have about 4k in completely unrelated side income that I've made.  Can I claim this under my consulting business, even though it's in a different field and not related?  I wasn't sure if this was against IRS rules or not.  I've been searching the IRS site and didn't find any info pertaining to this. 

fiveoh

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Re: Report unrelated side income under business?
« Reply #1 on: August 01, 2016, 08:21:16 PM »
Let me bounce this off you guys and see if I'm interpreting it right this is from https://www.irs.gov/businesses/small-businesses-self-employed/do-you-need-a-new-ein :

Sole Proprietors

You will be required to obtain a new EIN if any of the following statements are true.
•You are subject to a bankruptcy proceeding.
•You incorporate.
•You take in partners and operate as a partnership.
•You purchase or inherit an existing business that you operate as a sole proprietorship.

You will not be required to obtain a new EIN if any of the following statements are true.
•You change the name of your business.
•You change your location and/or add other locations.
•You operate multiple businesses.

It seems like the last line basically says I can have multiple ways of earning income(multiple business) under the same EIN so I should be fine.  Am I reading that right?

Edit: Also if the side income is made out to me and not the business, will that be an issue?
« Last Edit: August 01, 2016, 08:23:38 PM by fiveoh »

kudy

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Re: Report unrelated side income under business?
« Reply #2 on: August 01, 2016, 08:33:39 PM »
I'm not a tax expert, but my understanding of "side income" is that you might not want to report it as income under your business, as then you'll be paying additional self employment taxes on the money. Basically, if you can legitimately say it's "Miscellaneous" income and not business income, that might be more desirable for a lower tax rate.

The only reason I can think that you might want to report it as business income is if you are funding a SEP IRA with 25% of the profits for the year, in which case the math might work out to be more advantageous as business income?

fiveoh

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Re: Report unrelated side income under business?
« Reply #3 on: August 01, 2016, 08:38:42 PM »
I'm not a tax expert, but my understanding of "side income" is that you might not want to report it as income under your business, as then you'll be paying additional self employment taxes on the money. Basically, if you can legitimately say it's "Miscellaneous" income and not business income, that might be more desirable for a lower tax rate.

The only reason I can think that you might want to report it as business income is if you are funding a SEP IRA with 25% of the profits for the year, in which case the math might work out to be more advantageous as business income?

This has been fairly regular small amounts of income not a one off hobby income.  I'm pretty sure its considered "Self employment income" so I believe either way there will be "Self employment" taxes.  I have a solo 401k setup with the business as well that I wanted to funnel this money into. 

jwright

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Re: Report unrelated side income under business?
« Reply #4 on: August 02, 2016, 08:01:02 AM »
You have to report all worldwide income, no matter what the source. 

You should still report on Schedule C and deduct related expenses as appropriate.

You do not have to report under your existing EIN; just do a second Schedule C under your social security number.

fiveoh

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Re: Report unrelated side income under business?
« Reply #5 on: August 02, 2016, 10:28:52 AM »
You have to report all worldwide income, no matter what the source. 

You should still report on Schedule C and deduct related expenses as appropriate.

You do not have to report under your existing EIN; just do a second Schedule C under your social security number.

Thanks.  If I want to, can I report under my existing EIN?

bacchi

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Re: Report unrelated side income under business?
« Reply #6 on: August 02, 2016, 02:04:39 PM »
You have to report all worldwide income, no matter what the source. 

You should still report on Schedule C and deduct related expenses as appropriate.

You do not have to report under your existing EIN; just do a second Schedule C under your social security number.

Thanks.  If I want to, can I report under my existing EIN?

How were you paid?

fiveoh

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Re: Report unrelated side income under business?
« Reply #7 on: August 02, 2016, 02:09:09 PM »
You have to report all worldwide income, no matter what the source. 

You should still report on Schedule C and deduct related expenses as appropriate.

You do not have to report under your existing EIN; just do a second Schedule C under your social security number.

Thanks.  If I want to, can I report under my existing EIN?

How were you paid?

Direct deposit to my personal account.

jwright

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Re: Report unrelated side income under business?
« Reply #8 on: August 04, 2016, 06:59:58 AM »
Is your existing EIN for a single member LLC?

If so, I supposed you could because that is a disregarded entity for tax purposes; it's all going to the same bucket.  I still wouldn't advise it because you don't want to pierce the corporate veil by co-mingling personal funds with your business.

If your EIN is electing to be treated as an S-Corporation, or a different entity, then no because it is taxed differently.