Image courtesy of user "777546" on Pixabay.com

Image courtesy of user “777546” on Pixabay.com

When a sole proprietor has an employer identification number (EIN), it would seem to be common sense that the proprietor would put that EIN on the Schedule C for the proprietorship.

Not so fast — especially if the sole proprietorship is a single-member LLC taxed as a sole proprietorship.

Here’s what the instructions to Schedule C say:

If you are the sole owner of an LLC that is not treated as a separate entity for federal income tax purposes, you may have an EIN that was issued to the LLC (in the LLC’s legal name) if you are required to file employment tax returns and certain excise tax returns. However, you should enter on line D only the EIN issued to you and in your name as a sole proprietor. If you do not have such an EIN, leave line D blank. Do not enter on line D the EIN issued to the LLC.

From the instructions to Schedule C. The bolded part is actually bolded by the IRS in the instructions.

So if the proprietor has an EIN in his or her name, that EIN would go on the Schedule C. If the proprietor doesn’t have an EIN, the EIN line is left blank.

If the proprietorship is a one-person LLC, and the LLC has an EIN, the EIN line is left blank because that EIN belongs to the entity, not to the proprietor … even though the entity and the proprietor are treated as the same thing for federal tax purposes.

Example 1:

Joe the Window Washer is a sole proprietor. He does not have an LLC. However, he does have an EIN in his name personally. Joe will put this EIN on his Schedule C.

Example 2:

Joe the Window Washer is a sole proprietor who operates Joe the Window Washer, LLC. The LLC has an EIN but Joe himself does not. Joe will leave the EIN line blank on his Schedule C.

Full Disclosure — I’ve Done This Wrong Myself

I’ve made this mistake before, in putting an LLC’s EIN on Schedule C when I shouldn’t have. This was a few years ago now. The client never received a notice from the IRS, so it appears that nothing disastrous happens when you put an LLC’s EIN on Schedule C. Still, it’s technically not right and proper.

“This blog post, along with comments that may follow, should not be considered tax advice. Before you make final tax or financial decisions, please secure a professional tax advisor to give you advice about your unique situation. To secure Jason as your accountant, please click on the ‘Services’ link at the top of the page.”