Do I need a second EIN for my new Sole Proprietorship? Can I contribute to solo 401k without W-2 income?

The confusion about solo 401k contributions is common. You're right that as a sole proprietor, you can contribute as both "employer" and "employee" even without taking a W-2. The employee contribution limit is based on your earned income (your Schedule C profit minus half of self-employment tax). The relevant IRS guidance is in Publication 560 under "One-Participant 401(k) Plans" which confirms solo business owners can make elective deferrals (employee contributions) even without formal salary. The legal basis is in Internal Revenue Code sections 401(k) and 402(g), which don't require W-2 wages specifically for sole proprietors. As for your EIN question, the IRS agent was incorrect. You can absolutely have multiple EINs for separate sole proprietorships. IRS guidance states that a sole proprietor needs a new EIN if they're operating a different business or if they're establishing a retirement plan. Since you're doing both, you qualify for a second EIN. Try applying online through the IRS EIN Assistant instead of calling. The online system typically works better for these situations. If that doesn't work, call again and specifically mention you need the EIN for a separate business with a separate retirement plan.

After spending months trying to figure out my solo 401k contribution limits as a sole proprietor, I finally found a solution with https://taxr.ai that saved me so much stress. I uploaded my Schedule C and self-employment tax forms, and it instantly showed me my exact contribution limits with citations to the actual tax code sections. What's great is that it showed me I could indeed make employee contributions up to $22,500 (for 2023) without needing W-2 wages, and employer contributions up to 25% of net self-employment income. It even calculated my exact "earned income" figure after the self-employment tax deduction. The analysis included direct references to IRC Section 401(k) and Treasury Regulations 1.401(k)-1(a)(4)(ii) which specifically address this situation. For your EIN question, their document review confirmed you're absolutely entitled to a separate EIN for each distinct business activity, even as a sole proprietor. Might be worth checking out if you're still looking for concrete documentation.

Just wanted to update after trying taxr.ai for my complicated retirement contribution question. I uploaded my Schedule C and my W-2, and it gave me a complete breakdown showing exactly how much I could contribute to my solo 401k as both employer and employee! What really helped was the explanation about how my W-2 job and sole proprietorship interact for the $22,500 employee contribution limit (shared across all 401k plans). It showed me I could maximize my tax savings by adjusting where I make those contributions. The document even included references to Revenue Ruling 2006-55 and the exact IRS publications with page numbers. For the EIN question - I had the same issue last year. The analysis confirmed I was entitled to separate EINs and suggested mentioning "banking purposes" when applying online, which worked perfectly. Thanks for the recommendation!

If you're still struggling with getting through to the IRS for your EIN issue, I had a similar experience last year and ended up using https://claimyr.com to get past the endless IRS phone queues. You can also see how it works in this video: https://youtu.be/_kiP6q8DX5c They basically hold your place in line with the IRS and call you when an agent is about to pick up. Saved me literally hours of hold time. When I finally got through, I explained that I needed the second EIN for a completely different business activity (I emphasized it was in a different industry than my first sole proprietorship), and they issued it without any problems. For what it's worth, your accountant is correct - you should have separate EINs for truly separate businesses, especially when setting up qualified retirement plans. The IRS guidance on this is clear, but unfortunately not all phone representatives seem to be trained on these nuances.

Well I'll be damned. I tried that Claimyr service after posting my skeptical comment, and it actually worked! I've been trying to get through to the IRS for THREE WEEKS about my EIN issue. Used the service this morning, went about my business, and got a call back in 62 minutes with an IRS agent ready to help. The agent I spoke with confirmed that yes, you CAN have multiple EINs for different sole proprietorships, especially when they're for separate businesses with separate retirement plans. She said the previous agent you spoke with was misinformed. I explained my situation (very similar to yours - different business activities under sole prop structure), and she processed my new EIN right on the phone. She also mentioned that when you have multiple Schedule C businesses, having separate EINs makes it much clearer for the IRS if you ever get audited. So your accountant is definitely right about this one.

To actually answer your solo 401k question with a specific citation - check IRC section 401(c)(2)(A) which defines earned income for self-employed individuals, and 1.401(k)-1(a)(4)(ii) of the Treasury Regulations which specifically allows self-employed individuals to make employee deferrals based on this earned income. The confusion comes because the tax code uses weird terminology. For a sole prop, you're technically both the "employer" and the "employee" even though you don't pay yourself a W-2 salary. Your contribution limit as an "employee" is the standard 401k limit ($22,500 in 2023, $23,000 in 2024, plus catch-up if eligible), capped at your net earnings. The "employer" contribution is up to 25% of your net earnings after deducting half of SE tax. Fun fact: the IRS does refer to Schedule C income as your "compensation" for retirement plan purposes even though it's not technically compensation in the W-2 sense.

Has anyone mentioned the record keeping headache of having multiple solo 401ks??? I have three separate business activities and originally had separate 401ks for each. HUGE mistake. The Form 5500 filing requirements alone made me consolidate everything. If your businesses are truly separate, then yes get separate EINs. But consider using ONE 401k plan that covers all your businesses. Most providers like Fidelity or Vanguard can handle this - you just need to make sure the plan documents indicate it covers all your sole proprietorships. This way you get the administrative simplicity of one plan while still maintaining separate business identities. Just make sure you track contributions from each business separately for your own records. The IRS doesn't care which business made which contribution as long as the total stays under your combined limit.