The Internal Revenue Service is making a few changes to the application process for Employer Identification Numbers, or EINs. Starting May 13, only those individuals with tax identification numbers will be allowed to request an EIN as the “responsible party” on the application.
This means applicants claiming to be the responsible party must have either a Social Security number (SSN) or an Individual Taxpayer Identification Number (ITIN). This change prohibits entities from using their own EINs to qualify for additional EINs.
The change applies to both the paper Form SS-4, Application for Employer Identification Number, and the online EIN application.
An EIN—a nine-digit tax identification number—is assigned to sole proprietors, corporations, partnerships, estates, trusts, employee retirement plans and other entities for purposes of filing taxes and reporting.
Who’s in Charge?
Check out the Form SS-4 Instructions for an explanation of who should be the responsible party for various kinds of entities. In most cases though, the responsible party is the person who ultimately owns or controls the entity, or who exercises ultimate effective control over it. If more than one person meets the definition, the entity may decide which individual will be named the responsible party.
There will be no change, however, for tax professionals who may act as a third-party designee for an entity. They may continue to complete the paper or online applications on behalf of their clients.
Why the Change?
This shift in requirements provides greater security to the EIN process by requiring an individual to be the responsible party. It also will improve transparency to the process. If there are changes to the responsible party, the entity can change the responsible party by completing Form 8822-B, Change of Address or Responsible Party. If such a change is necessary, however, Form 8822-B must be filed within 60 days to be valid.