Edited By Ceridwyn

Factors to Consider Before Getting an EIN

Contributed by Itsasecret

The primary arguments raised in the forum against using an EIN take two forms: One, shoppers simply object to companies requiring an EIN when there is no legitimate reason for them to do so. The other objection is because some shoppers don’t want their town or city or HOA to know they have a home business and they think somehow the IRS is going to tell them about it if they get an EIN.

One forum member stated that right after getting an EIN for a business unrelated to mystery shopping, they were contacted about requirements for licensing, business property taxes, zoning issues and other burdens and were hassled so much they decided not to start the business rather than comply. The conclusion that obtaining the EIN caused the scrutiny was based on coincidence of the timing.

It is unlikely that there was true cause and effect here. Since the existence of an EIN is not proof that a business exists, it makes no sense that the IRS would, in violation of their own policies, make a practice of tipping off towns all over the country that one of their residents might be about to start a business. For one thing, the owner’s address on the IRS records may not even be the address where business will be conducted. So which locale would the IRS tip off?

Because local ordinances vary from town to town, the best course of action for any shopper worried about business laws would be to anonymously contact their local agencies (pretend it’s a mystery shop!) and flat-out ask them what the rules are for home-based businesses of this sort. Ask whether licenses are required, whether there are additional taxes over and above income taxes, whether zoning restrictions would preclude a home-based business where the work is actually done off premises. Ask whether it matters if you have an EIN. Once you have the information, you can make an informed decision. If you are unemployed or on disability, it would be good to ask if getting an EIN will somehow affect your benefits.

Without knowing the facts, you would be relying on someone else’s speculation that this may be bad for you.

Anyone can get an EIN, intending to start a business, and then change their mind about it after they get it. I know from years of having one and not using it that nobody comes around asking you to fill out payroll tax forms just because you have an EIN.

But the decision to get one is entirely yours. Mystery shoppers have no legal or tax-related reason to use one, primarily it simply gives some protection against identity theft.

Editors note: We are not tax professionals, so please understand that this is not professional advice.

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