IRS Revises EIN Application Process

As part of its ongoing security review, the Internal Revenue Service announced today (IR-2019-58) that starting May 13th, only individuals with tax identification numbers may request an Employer Identification Number (EIN) as the “responsible party” on the application.

An “EIN” is a nine-digit tax identification number assigned to sole proprietors, corporations, partnerships, estates, trusts, employee retirement plans and other entities for tax filing and reporting purposes.

The new rules will prohibit entities from using their own EINs to obtain additional EINs.  The requirement will apply to both the paper Form SS-4, Application for Employer Identification Number, and the online EIN application.

An individual named as a responsible party must have either a Social Security number (SSN) or an individual taxpayer identification number (ITIN). By making this announcement weeks in advance, the IRS is giving entities and their representatives time to identify the proper responsible official and comply with the new policy.

The Form SS-4 Instructions provide a detailed explanation of who should be the responsible party for various types of entities. Generally, the responsible party is the person who ultimately owns or controls the entity or who exercises ultimate effective control over the entity. In cases where more than one person meets that definition, the entity may decide which individual should be the responsible party.

Only governmental entities (federal, state, local and tribal) are exempt from the responsible party requirement as well as the military, including state national guards.

The new rules are not intended to make any changes for tax professionals who may act as third-party designees for entities and complete the paper or online applications on behalf of clients.

The new requirements will provide greater security to the EIN process by requiring an individual to be the responsible party and improve transparency.  If there are changes to the responsible party, an entity can change the responsible official designation by completing Form 8822-B, Change of Address or Responsible Party. A Form 8822-B must be filed within 60 days of a change.

If you need assistance obtaining an EIN or have questions about the new requirements, please contact someone in our business and tax department at 937-223-1130 or Jsenney@pselaw.com

AUTHOR: Jeff Senney
jsenney@pselaw.com