In May of 2013 the Treasury Department issued final regulations related to the updating of responsible parties named by taxpayers in their applications for employer identification numbers or EINs. A taxpayer’s request for an EIN is made on IRS Form SS-4. As part of the form, the taxpayer requesting the EIN must identify by name and tax i.d. number (i.e., a Social Security Number for an individual or an EIN for an entity) a responsible party who is defined as the principal officer of a corporation, general partner of a partnership, owner of a disregarded entity, and in all other matters “the person who has a level of control over, or entitlement to, the funds or assets in the entity that, as a practical matter, enables the individual, directly or indirectly, to control, manage, or direct the entity and the disposition of its funds and assets.” The responsible person is the point person for the taxpayer and is usually the person who has direct supervision and control over paying the taxpayer’s tax liabilities, including employment taxes for which personal liability may apply. Under the 2013 regulations, the IRS is allowed to revise its forms and instructions to require taxpayers to update their responsible party information.
In the fall of 2013 the IRS revised the instructions to Form 8822-B which is used to correct the naming of responsible parties. The instructions provide that beginning January 1, 2014, any entity with an EIN must file Form 8822-B to report the most recent change to its responsible party designation. A responsible party change may commonly occur due to adjustments to a taxpayer’s management (including the change in position, death, retirement, or other termination of a responsible party) or upon a third-party ownership acquisition of the taxpayer, like a stock acquisition. Form 8822-B must be filed within 60 days of the change. Additionally, if the change of the responsible party occurred at any time before 2014, Form 8822-B must be filed with the IRS before March 1, 2014 reporting the latest change. The need to update responsible party information applies to all taxpayers with an EIN regardless of whether the taxpayer obtained the EIN itself or if it used a third-party nominee like an attorney or accountant to get the EIN.
At present there is no penalty for a taxpayer’s failure to timely file Form 8822-B. However, the risks to not filing the form include: IRS notices may go to the wrong person which could cause the unknown and costly assessment of taxes, penalties, and interest; or an inappropriate person is examined by the IRS as being potentially personally liable for unpaid employer-withheld employment taxes.
If you are a taxpayer with an EIN, you should consider timely filing the Form 8822-B if you have had a change in your responsible party, or if the wrong person is currently listed as your responsible party. For more information, please contact Jason Melville or call 208.344.6000.