The IRS has announced there will be changes to the process to issue employer identification numbers beginning on May 13 in New Release IR 2019-58. The IRS indicated these change are meant to enhance security.
Entities will no longer be able to use their own EIN as the identification number for the responsible party and the change will apply to both EINs obtained online and via filing a paper Form SS-4. The release describes the responsible person as follows:
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 entity may decide which individual should be the responsible party.
The release explains the new system as follows:
Individuals named as responsible party must have either a Social Security number (SSN) or an individual taxpayer identification number (ITIN). By making the announcement weeks in advance, entities and their representatives will have time to identify the proper responsible official and comply with the new policy.
The Form SS-4 Instructions provide a detailed explanation of who should be the responsible party for various 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 entity may decide which individual should be the responsible party.
The news release notes that the only exemptions from the responsible party requirements are governmental entities, including the military and state national guards.
The news release provides that there is “no change” for tax professionals who act as third-party designees for entities and complete the application process. Or, to put it more directly, tax professionals will not have to provide their own social security numbers in this process.
The news release justifies the change as follows:
The new requirement will provide greater security to the EIN process by requiring an individual to be the responsible party and improve transparency. 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 must be filed within 60 days of a change.