I was signing up with some mystery shopping companies that you recommended in your training program, and one of them stated that you had to have an EIN to shop for them. Here is what is in their IC agreement:
“Shoppers are independent contractors. In being an IC you must register yourself as a business in the state in which you live and to obtain a Federal Employer Tax ID number to file your taxes. This is the responsibility of all shoppers.”
Can you give me some advice as to where I might go to get this? Do I need to register myself as a business and my Tax ID number before I sign up as a mystery shopper?
First let me explain to others who are reading this: An EIN is an “Employer Identification Number” which you can get from the IRS, free of charge. If you want to make a comparison, it is sort of like an Employer’s Social Security Number. (SSN)
The benefit of using an EIN instead of your SSN for mystery shopping assignments is that you’ll be possibly protecting the misuse of your SSN. Remember, you’re going to be signing up with a plethora of companies, and the more companies that have it, the more at risk you are for misuse.
However, according to US law, you do not need an EIN unless you are hiring employees, (to pay their taxes) and in some cases, to open a separate business banking account, (it depends on your bank). As of this writing, you are not legally required to have an EIN to be an Independent Contractor (IC) with mystery shopping companies or otherwise.
Some mystery shopping companies prefer that you have an EIN to protect them from IRS tax fraud. Their thoughts are that if you’re an IC, you’re in business for yourself so you need an EIN. Many shoppers don’t bother to file their shopping income because sometimes it’s only a few bucks here or there. By putting this stipulation in the agreement, the Mystery Shopping company is just taking extra steps to protect itself in case one of its shoppers doesn’t abide by the laws.
Even if you were to get an EIN, you’d still be a sole-proprietor, and you’d mix all the income together anyway…but will still file separate forms (1099s for misc income, itemizing your deductions) at the end of the year.
Bottom line: talk to a tax professional or small business legal advisor if you’re really concerned and verify that this information is correct for your particular state. You can contact local organizations such as the SBA, SCORE, your local economic development council, or even your local chamber of commerce to ask questions about where to start.
Regardless of whether you get an EIN or use your SSN for tax purposes, as someone who is self-employed, you do need to keep track of all of your income and expenses while mystery shopping, and report them as required by law.
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