IRS beefs up security on EIN application process

The Internal Revenue Service is tightening the security on its Employer Identification Number application process, starting May 13, allowing only individuals who already have a tax identification number such as a Social Security Number or an Individual Taxpayer Identification Number to request an EIN as the “responsible party” on their applications.

An IRS office building in East Harlem
An IRS office building in the East Harlem neighborhood of New York

Individuals named as a responsible party on an EIN application will now need to have either an SSN or ITIN. The IRS believes the new requirement will offer greater security in the EIN process by requiring an individual to be the responsible party and improve transparency. The IRS said Wednesday in announcing the new requirement there would be no change for tax professionals who act as third-party designees for entities and complete the paper or online applications on behalf of their clients.

An EIN is a nine-digit tax ID number assigned to sole proprietors, corporations, partnerships, estates, trusts, employee retirement plans and other entities for tax filing and reporting purposes. The change will prohibit employers from using their own EINs to get additional EINs. The requirement will apply to both the paper version of the Form SS-4, Application for Employer Identification Number, in addition to online EIN applications.

By making the announcement weeks in advance of the May 13 start date for the new requirement, the IRS said entities and their representatives will have time to identify the proper responsible official and comply with the new policy. The Form SS-4 Instructions include an explanation of who should be the responsible party for different 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 business can 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.

If there are changes to the responsible party, the entity can change the responsible official designation by completing Form 8822-B, Change of Address or Responsible Party. A Form 8822-B needs to be filed within 60 days of a change.

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