Mark your calendars for May 13. As part of efforts to increase security and transparency, the IRS has an update on tax identification numbers.  

The IRS has changed the application process regarding employer identification numbers (EIN). Starting May 13, only individuals with tax identification numbers may request an EIN as the ‘responsible party’ on the application.

What is an EIN?

As a reminder, an EIN is a nine-digit tax ID number assigned to the following for tax filing and reporting purposes:

  • Sole proprietors
  • Corporations
  • Partnerships
  • Estates
  • Trusts
  • Employee retirement plans
  • Other entities

How this change could impact you.

According to the IRS, the change will prohibit entities from using their own EINs to obtain additional EINs. The requirement applies to both the paper Form SS-4 and online EIN application.

Responsible party.

Individuals who are named as responsible party must either have a Social Security number (SSN) or an individual taxpayer identification number (ITIN).

These Form SS-4 instructions provide a detailed explanation of who should be the responsible party for various types of entities.

In general, the responsible party is the person who ultimately owns or controls the entity or exercises ultimate effective control. If there are cases where more than one person meets this definition, the entity may decide which individual represents the responsible party.

Exempt from this requirement are governmental entities and the military.

FYI: The IRS states that there is no change for tax professionals who may act as third-party designees for entities and complete paper or online applications on behalf of clients.

If there are changes to the responsible party, you’re required to complete Form 8822-B within 60 days of the change.

To read the full release from the IRS, please click here.