Social Security Number Vs. EIN for Freelancers

In THIS ARTICLE, I wrote about how to protect yourself when freelancing for lots of different places.

One of the points I made in the article is that it’s not ‘safe’ to be spreading your social security number around to everyone you write for… to protect yourself as a freelancer, you might want to get an EIN instead.

An EIN is an employer identification number, and in the US, it is a legal substitute for giving your social.

Things to consider prior to signing up for a free EIN is whether or not you are doing this writing work professionally or just as a hobby on the side. An EIN makes you an ‘official’ business, and as such, you will have to file and claim the income on your taxes as self -employment, and the EIN will be treated as though you own a sole-proprietorship.

Now, the good part of that is you can take more deductions as a business than you can with just misc. income. The downside, you have to pay self employment tax at the end of the year. If you make more than a few hundred dollars – the EIN likely benefits you more than it would cause problems.

Applying for an EIN is free – you can do so online through the IRS’s website at:

http://www.irs.gov/businesses/small/article/0,,id=102767,00.html

You can either make a freelancing ‘business’ or you can choose your name or pen name as your ‘business name’.

Me, personally, I use my pen name as my business name. Why? Well, Michelle L Devon is not my legal name. Because of this, when someone pays me, I would have to reveal my real name to a bunch of people to get a check I can cash or deposit at my bank.

If, however, I register for an EIN and make my business name my pen name, then I can take that EIN paperwork to the bank and add my pen name to the signature card of my bank account and thus I am allowed to cash or deposit payments into my bank account, without having to tell any of the contract places what my legal name is, and I never have to reveal my real name to anyone.

NOTE: some banks require a business account when you do this, some don’t. Some business accounts charge a monthly maintenance fee – just another thing to keep in mind.

Anyway, the point is – if you’re worried about writing for someone because they are asking for your social security number, having an EIN is an easy, free way to bypass the social request, give the EIN instead, and if you are writing professionally, may give you some tax breaks at the end of the year too.

Keep writing!

Love and stuff,
Michy