IRS Revises EIN Application Policy, Now Requires an Individual to be Listed as the “Responsible Party”
March 29, 2019
Authored by: Melissa Sprinkle and Tiffany McKenzie
The IRS announced on March 27, 2019 that in an effort to enhance security and improve transparency, the “responsible party” on applications for an employer identification number (EIN) must now be a natural person.
An EIN is the tax identification number assigned to entities such as trusts, estates, retirement plans, LLCs, partnerships, and corporations. An entity obtains such a number by completing the IRS Form SS-4 or an online application. One question in the application process asks the applicant to identify the “responsible party,” which the IRS defines as “the person who ultimately owns or controls the entity or who exercises ultimate effective control over the entity.” In deciding who to list as the responsible party, the IRS encourages applicants to consider whether the party has “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.” Only governmental entities and the military are exempt from this requirement, and may continue to list non-individual entities as the responsible party.
This policy will go into effect for all EIN applications submitted on and after May 13, 2019.