In December, 2017 the Internal Revenue Service (IRS) released a revised Form SS-4, Application for Employer Identification Number and related instructions. An employer identification number (EIN) is a nine-digit number assigned by the IRS for the purpose of identifying taxpayers who are required to file various business income tax returns. An EIN is also required for informational and entity classification election filings, and may be required to open a US bank account. With the revisions, the IRS hoped to resolve certain ambiguities within the application process.
The most noteworthy revision relates to the definition of ‘responsible party’. Since 2010, the IRS has required applicants to include a responsible party on line 7a of Form SS-4. The instructions define responsible party as the person who owns or controls the entity-applicant, or who exercises ultimate effective control over the entity-applicant. Prior to the revisions, the term responsible party was subject to interpretation as to whether an entity was a valid responsible party. However, the revised instructions limit the definition of responsible party to only include individuals, unless the applicant is a government agency. We understand the IRS has recently accepted SS-4 Forms with an entity as the responsible party, though it is unclear how long the IRS will continue to accept such applications. The instructions also clarify the role of the responsible party as it applies to EIN applications.
Generally speaking, the instructions require an applicant to include the responsible party’s social security number (SSN) or income tax identification number (ITIN) on line 7b of Form SS-4. In prior versions of Form SS-4, line 7b could be left blank when a foreign entity applied for an EIN solely for the purpose of making an entity classification election pursuant to Form 8832, Entity Classification Election, and the responsible party did not have, and was ineligible to obtain a SSN or ITIN. The revised instructions do not provide for this exception. Therefore it seems line 7b should be left blank without considering the purpose of the EIN application where the responsible party is a foreign individual who is ineligible to obtain a SSN or ITIN.
Often, the sole owner or controlling party is itself a business entity. Anticipating confusion in instances such as these, the instructions include an example for added clarity: where a corporation is the general partner of a publicly traded partnership for which Form SS-4 is filed, the appropriate responsible party of the partnership is the principal officer of the corporation. Presumably the same rule applies to single member limited liabilities companies and private partnerships, though this is not expressly stated in the instructions.
The instructions also include new rules for foreign-owned domestic disregarded entities filing Form SS-4, as well as foreign eligible entities requesting an EIN for purposes of making entity classification elections pursuant to Form 8832. While these new rules do not fundamentally change the application process for such entities, they do represent important procedural changes that international enterprises need to consider when preparing Form SS-4.
Other critical filing requirements include, subject to certain restrictions based on the residence of the applicant, applications may be made through the IRS website, by mail or by phone or fax, and a responsible party may only apply for one EIN per day. Where a third-party preparer or adviser is applying on behalf of an applicant through the IRS website, Form SS-4 must still be fully completed and retained by the third-party preparer.
