IRS Updates Rules With Respect to FEIN Applications

IRS Updates Rules With Respect to FEIN Applications

      Various businesses, as well as other parties, need to apply for a Federal Employer Identification Number (“FEIN”). Recently, the IRS announced changes to some of the procedures. See IRS Revises EIN Application Process, Seeks to Enhance Security, IR-2019-58 (March 27, 2019).

      The application for an FEIN is made on Form SS-4. In this release, the IRS announced that, effective May 13, 2019, SS-4s must be submitted by natural persons.

      The SS-4 requires that there be designated a “responsible party” with respect to the business for which the FEIN is sought. The Form SS-4 must identify that responsible party and as well set forth their Social Security number or Individual Taxpayer Identification Number (“ITIN”). With this change, it will not be possible to, for example, identify the corporate parent of a wholly-owned subsidiary, along with its FEIN, as the responsible party.

      The responsible party identified on the SS-4 should be “the person who ultimately owns or controls the entity or exercises ultimate effective control over the entity. In cases where more than one person meets that definition, the entity may decide which individual should be the responsible party.”

     As set forth in the above-referenced press release, it is the position of the IRS that“The new requirement will provide greater security to the EIN process by requiring an individual to be the responsible party and to improve transparency.”

      The press release reiterated that changes in the responsible party may be made on Form 8822-B. There does not appear, however, to be a mechanism by which a Responsible Party may resign from that position.