Form SS-4 changes to the responsible party

Your Guide to State, Local, Federal, Estate + International Taxation

Form SS-4, responsible party, EIN, IRS, taxIn a world as connected as ours, privacy is of great importance when it comes to our personal and business lives. For this reason, many people keep their identity private when they start a new business by using an LLC or other entity as the responsible party when registering with the IRS for an employer identification number (EIN). An EIN is a federal tax identification number used by business entities, estates and certain trusts to file federal tax returns and to make certain tax elections. Banks require those who are applying for new entity accounts to provide an EIN so that the proper tax reporting can take place.

With the most recent update to the application for the EIN (Form SS-4), the IRS has removed the ability to use an entity as the responsible party. The responsible party must be an individual, unless you are applying for an EIN for a government agency. The individual must also provide their Social Security number or individual tax identification number, unless they are ineligible to obtain either.

The IRS also included a better definition of who would be considered a responsible party: the person who ultimately owns or controls the entity or who exercises ultimate effective control over the entity. The responsible party should have a level of control over, or entitlement to, the funds or assets in the entity that, as a practical matter, enables the person, directly or indirectly, to control, manage or direct the entity and the disposition of its funds and assets.

So, what does this all mean? Well, it means that if you are looking to start a business and need to apply for an EIN, make sure you read the instructions thoroughly so that the correct person is chosen as the responsible party. If you have any questions about applying for an EIN, contact your Henry+Horne tax professional.

Brandon Broschinsky