A new IRS mandate effective in 2014 requires holders of employer identification numbers (EINs) to maintain a “responsible party” on file with the IRS. Generally, the responsible party is the “principal officer,” “general partner” or “owner” as specifically defined in IRS Form 8822-B and the associated instructions. Generally, the responsible party is the person that has the authority to directly or indirectly control, manage or direct the business or the entity and the disposition of its funds and assets. This information was intended to be initially provided with the entity’s application for an EIN on Form SS-4. However, (1) the responsible party may have changed over time (for example, due to personnel turnover or business restructuring), and (2) the IRS has found that the party on file with the IRS is often not the person currently responsible for the business and is frequently a “nominee” – someone granted limited authority used only during the business formation process.
So what does this mean for you? Unless you are confident that the current responsible party as indicated on your original Form SS-4 is correct (and you may not have a copy of the form on hand to look at), we recommend that all EIN holders update the responsible party with the IRS by filing Form 8822-B, Change of Address or Responsible Party – Business. Although this is a recent IRS requirement, the due date to file Form 8822-B for any required updates to a responsible party is March 1, 2014. This requirement applies to all holders of an EIN, including individuals who have an EIN for the conduct of a business reported on Schedule C and all entities, even entities which are disregarded or included within a consolidated filing. When completing Form 8822-B, persons designated as the responsible party must report their social security number, EIN or ITIN. Note the responsible party may still be the entity’s principal officer, general partner, grantor, owner or trustor, assuming this party meets the definition above. Once Form 8822-B is filed with the IRS, you are only required to resubmit the form within 60 days of a change in responsible party.
Reprinted with permission by McGladrey LLP.