ss number/tax identification number/taxes
I had a friend who disassociated himself with his social security number(In the US). when he did that he got a tax identification number. He said when he did that he didnt have to pay certain taxes. i didn't get to hear a lot about this,so i was wondering what this really was and how it works and why.
thanks =)
Re: ss number/tax identification number/taxes
in a nutshell, Tax Identification Numbers are issued to businesses. However, lately there has been a trend to issue Tax Identification Numbers to individuals as well (most publicized is TIN numbers issued to illegal aliens). The tax 'scam' is based on the fact that America has a progressive tax system i.e one person earning $80k a year pays FAR MORE in total tax money than two people each earning $40k per year. Thus if one can arrange their financial affairs to make 1/2 of their income appear under their SS# and the other 1/2 appear under their TI#, and then files two separate tax returns, they'll get away with paying a lower amount of tax on the same total income ... until they are audited at least !
Re: ss number/tax identification number/taxes
When I incorporated I got a tax ID number for my work stuff. I still have a SS number to prove who I am though...
Re: ss number/tax identification number/taxes
A TIN is for a business - in particular a corporation.
Your friend is wading in dangerous water if he isn't keeping a set of books for the business and another for himself. Then the IRS wants returns on BOTH of them!
I write a lotta multi-purpose stuff off on the business, but I don't write off my entire life on it!
Re: ss number/tax identification number/taxes
How does one legally dissasociate themselves from a SSN without revoking their citizenship? I think your friend is purely breaking the law.
Sure his business earnings will go to a TIN, but at some point, they will find out whose SSN is on the DBA or corp. charter.
Re: ss number/tax identification number/taxes
Most likely a tax scam. If you turn him in, you can get 10% of the back taxes he owes.
Re: ss number/tax identification number/taxes
If you incorporate, all of your income under your corporation is associated with your TIN number. You can dance as a corporation or basically conduct any business under one. Setting up a corporation is fairly simple to do.
The common way to do so is to form an umbrella corporation with a generic name, such as PBM Enterprises. Then under that corporation, have divisions that do specific things, such as Fancy Clothing, or Tina's Entertainment, Inc.
In every club you work at that reports income, fill out paperwork as Tina's Entertainment or the like, and they will issue you a 1099 for all dancer earnings THEY pay you. Any money you earn there you report under the corporate name. That way you have no personal liability and have increased the amount of write offs you are entitled to.
No one can detach themselves from their social, they merely conduct all or most of their business as a corporation, and file taxes as such. A corporation is a legal person. The corporation can issue him a paycheck of whatever amount they want (just go through Paychex or a payroll company and they will do your payroll and submit the withholding to the IRS). Now the person has personal income of a lesser amount than they would have had if they weren't incorporated.
Just find a good accountant and do some reading so that you are operating and filing your paperwork properly.
Re: ss number/tax identification number/taxes
You're oversimplifying this, but I'm getting very sleeeeepy, hopefully someone else can explain :)
Re: ss number/tax identification number/taxes
Quote:
Originally Posted by
Tina
In every club you work at that reports income, fill out paperwork as Tina's Entertainment or the like, and they will issue you a 1099 for all dancer earnings THEY pay you. Any money you earn there you report under the corporate name. That way you have no personal liability and have increased the amount of write offs you are entitled to.
No one can detach themselves from their social, they merely conduct all or most of their business as a corporation, and file taxes as such. A corporation is a legal person. The corporation can issue him a paycheck of whatever amount they want (just go through Paychex or a payroll company and they will do your payroll and submit the withholding to the IRS). Now the person has personal income of a lesser amount than they would have had if they weren't incorporated.
Clubs aren't require to 1099 corporations.
Could be a personal service corporation subject to 35% flat tax on undistributed income.
Deductions would still have to be valid business deductions.
The number of returns per year just went from 2 to 14, and the penalties for not filing or paying on time could be huge.
Not a good idea unless the person has some business savy.
Re: ss number/tax identification number/taxes
As an IRS authorized ITIN (individual tax identification number) Acceptance Agent (I am not employed by the gov't), I can tell say for certain that you cannot disassociate yourself from your Social Security Number. Any number you use to identify yourself as a taxpayer is a TIN - there are many different types of TINs.
ITINs are only issued to those people that are unable to get a Social Security Number, such as new immigrants and are ONLY used for tax return purposes. Once they are eligable, they are required by law to get a regular SS#.
An EIN (employer identification number) is used by those with and without employees that incorporate. However, your SS# will be used to obtain this EIN and will always be connected since you will be 'paid' by the corp - so the gov't will always know who you are. I have an EIN as well as a PTIN (preparer tax identification number) and the gov't associates those with my SS#.
ANY ITIN Acceptance Agent that wrongly issues an ITIN will eventually be caught and persecuted as well as the person/people that used their services. I will reiterate that I in no way work for or with the government. I cannot emphasize enough, however, the importance of not trying to defraud the gov't - At this year's IRS Nationwide Forum I attended, the, IRS was VERY adamant about the increase in the number of audits for self-employed as well as nabbing those trying to circumvent the tax process. They are committed to closing the tax gap and have sent out the bloodhounds.
Please, make sure you know your legal obligations and rights and do the very best you can to adhere to the law. It is in your best interest to do so. Sex work is already unfairly treated. The only way people like myself can try to change the rules is if we all try to stay off the radar and play the game by the rules (but without neglecting our rights).
Re: ss number/tax identification number/taxes
It has the same number of digits as a ssn and its easy to pass it off as a ssn.
Re: ss number/tax identification number/taxes
Quote:
Originally Posted by
242_fair
It has the same number of digits as a ssn and its easy to pass it off as a ssn.
Until you get caught.
The digits represent location and time of issue as well as differentiating between the types of TINs, so the IRS is well aware of the difference.
Re: ss number/tax identification number/taxes
The Individual TaxPayer Identification number is subject to the following condition:
"An ITIN, or Individual Taxpayer Identification Number, is a tax processing number only available for certain nonresident and resident aliens, their spouses, and dependents who cannot get a Social Security Number (SSN)"
That means it is for foreigners and NOT Americans.
"To obtain an ITIN, you must provide documentation substantiating foreign/alien status and true identity for each individual"
So basically the TaxPayer Id Number is the way in which LEGAL ailens pay their income taxes, because they cannot get a SIN #.
So I am not sure how this is being abused by immigrants or Americans?
Re: ss number/tax identification number/taxes
Quote:
Originally Posted by
242_fair
The Individual TaxPayer Identification number is subject to the following condition:
"An ITIN, or Individual Taxpayer Identification Number, is a tax processing number only available for certain nonresident and resident aliens, their spouses, and dependents who cannot get a Social Security Number (SSN)"
That means it is for foreigners and NOT Americans.
"To obtain an ITIN, you must provide documentation substantiating foreign/alien status and true identity for each individual"
So basically the TaxPayer Id Number is the way in which LEGAL ailens pay their income taxes, because they cannot get a SIN #.
So I am not sure how this is being abused by immigrants or Americans?
http://www.irs.gov/businesses/small/...=96696,00.html
There are several different types of TINs. As explained above. Americans with shitty credit apply to get a FEIN and a corresponding TIN...they use this to get credit with...as opposed to using their own SS# (which has bad credit attached to it). While you can, technically, do this...you cannot legally do this. The only time you can apply for credit using a business/corporation TIN is if you are purchasing BUSINESS supplies. Otherwise, you are just getting yourself deeper and deeper in the shit hole with the IRS (and credit companies...for fraud and opening an account using "false" documentation).
Anyways...
Onward.
Re: ss number/tax identification number/taxes
Quote:
Originally Posted by
242_fair
The Individual TaxPayer Identification number is subject to the following condition:
"An ITIN, or Individual Taxpayer Identification Number, is a tax processing number only available for certain nonresident and resident aliens, their spouses, and dependents who cannot get a Social Security Number (SSN)"
That means it is for foreigners and NOT Americans.
"To obtain an ITIN, you must provide documentation substantiating foreign/alien status and true identity for each individual"
So basically the TaxPayer Id Number is the way in which LEGAL ailens pay their income taxes, because they cannot get a SIN #.
So I am not sure how this is being abused by immigrants or Americans?
http://www.irs.gov/businesses/small/...=96696,00.html
Actually you are quite incorrect. There are in fact people that are considered US citizens (US Americans) that have never set foot in the US. I have clients that fit this status as I prepare international returns.
Also, many people here in the US illegally do in fact get ITINs by filing a legal tax return. It seems the IRS is more interested in closing the Tax Gap than immigration issues. There are many people that live outside the US that either earn income here or go to school here that need TINs. The abuse happens when people obtain someone else's ITIN or use a fake # in order to obtain employment as an TIN which is necessary for the processing of employment forms.
Re: ss number/tax identification number/taxes
Quote:
until they are audited at least
there are lots of things that work well until you are audited!
I asked my CPA about incorporating myself, and she said that maybe I could save money, but in the long run the IRS might get curious and audit me and some of the things I have written off or run through my corporation might not hold up. I can't remember the whole explanation exactly, but basically it just didn't seem worth it.
Re: ss number/tax identification number/taxes
Quote:
There are several different types of TINs. As explained above. Americans with shitty credit apply to get a FEIN and a corresponding TIN...they use this to get credit with...as opposed to using their own SS# (which has bad credit attached to it). While you can, technically, do this...you cannot legally do this. The only time you can apply for credit using a business/corporation TIN is if you are purchasing BUSINESS supplies. Otherwise, you are just getting yourself deeper and deeper in the shit hole with the IRS (and credit companies...for fraud and opening an account using "false" documentation).
Anyways...
Onward.
what if I did this to get a better interest rate to purchase a vehicle that I use for work? I get to write off my mileage anyway, so it is a legit business expense. not sure it would be worth the trouble though.
Re: ss number/tax identification number/taxes
^^^ no matter if you are using a SS# or personal TIN, the deductibility of business miles vs personal miles is subject to the same restraints. You cannot deduct mileage between your home and primary business location. If you form a corporation, essentially all miles become deductible. However, if you form a corporation, you will also incur 'double taxation' as well as significant additional accounting expenses - which usually outweigh the benefits if you're talking less than 1/2 million a year in gross revenues.
The 'credit rating substitution' gimmick is also drawing a large amount of scrutiny under the recently released gov't guidelines for financial institutions. As such it's highly probable that going the personal TIN route will increase the probability of an IRS audit as well as additional 'questions' from the lender in regard to the loan application.
Re: ss number/tax identification number/taxes
I also heard that certain taxes people pay are voluntary, and having a TIN excludes certain taxes. Is this true?
Re: ss number/tax identification number/taxes
^^^ only if you don't press the matter with the IRS and wind up in court ...