Best Answer: For most people, their social security number is their tax ID number for small businesses unless they have employees. I'm pretty sure you have a social security number, since otherwise your parents would not be able to claim you as a dependent on their taxes. Most of the time now, the social security numbers are applied for in the hospital when babies are born.
First question: Is this a good idea? That's not a tax question, of course. Do you have enough time, without messing up on school work, or losing time with your friends? Do you have potential customers, who would pay you, or do you mainly do face painting for friends? Develop a business plan, and write it down: Where and when will you do face painting? At shows? In someone else's place of business? How many customers can you serve in, for example, an hour or two, and how would customers know you're available to do face painting? How much can you charge, and who are you competing with? Think these things through, and probably your mom can help you plan.
Second, this is a good way to improve your knowledge of handling money. Keep track of how much time you spend doing face painting, and all your costs (your paints, brushes or other tools, cleaning materials, sample photos, whatever!). If you do have to report the income to the IRS (if it is enough), you can also report your costs and reduce the amount of tax you might have to pay. And you're learning about running a business.
Third, if you have "earned income", which you will from face painting, put as much as you can, even up to your full earnings, into an IRA account. This is a savings account where your money can grow for your whole life without any taxes on the income it earns. At your
age, your parent would need to be a "custodian" on the account, but the money is yours. If you open what's called a Roth IRA account, the money can earn interest, or be invested in the stock market, and grow for 50 years or more with no tax on it at all, even when you take it out. If you put $1,000 into a Roth IRA this year, and it earns an average of 8% each year, when you are likely to retire and want the money (for example, in 60 years), this $1,000 would grow to about $101,000. (You can't be sure of earning 8%, but that's not unrealistic on a mix of investments.)
Fourth, about taxes, if your "unearned income" (from investments outside your IRA account, for example) is less than $300, you don't have to file a tax return until your total income in one year is over $5,000. (If you have more than $300 investment income, you have to file at a lower income amount.) But you should have a tax ID number and, as someone else pointed out, your social security number IS a tax ID number. You don't need what they call an EIN (Employer ID Number) to do face painting, or to get a job; you might need one later if you form a company, for example.
Good luck, and don't let having a business get in the way of your school or other non-business activities, like sports, friends, music, and extra-curricular school activities!
If your business grows, and you need some guidance in making it into your career, you may want to look for the local office of the SBA (the Small Business Administration) or the SBDC (Small Business Development Center), two connected government agencies that look for ways to help small businesses grow, and can give you a lot of expert advice (mostly for free!).
BS_Not_Here · 8 years ago