In an effort to maintain correct ownership details, curb tax abuse schemes, and ensure the correct person is contacted when resolving a tax matter, the IRS is imposing new requirements to report a change in the identity of a “responsible party” for any entity that has an employer identification number (EIN), regardless of whether the entity is actively engaged in a trade or business. Starting January 1, 2014 an entity must report a change in its “responsible party” on Form 8822-B to the IRS within 60 days of the change. In addition, any change in “responsible party” made prior to 2014 must be reported on Form 8822-B prior to March 1, 2014.

Background
In general, every entity must obtain an EIN to be used for tax filing and reporting purposes. The IRS requires an entity to complete Form SS-4, Application for Employer Identification Number, to obtain an EIN. Prior to January 2010, the name and identifying number (usually social security number) of the principal officer, general partner, grantor, owner, or trustor was reported on Line 7a of the SS-4. Effective January 2010, the IRS revised Form SS-4, Line 7a to instead report the name and social security number of the entity’s “responsible party.” However, the IRS believed that in many instances the individual originally reported was either acting on behalf of the entity or is no longer in that position. Therefore, in an effort to improve its records, the IRS is imposing the new Form 8822-B reporting requirements as explained above.

Who Is A “Responsible Party?”
The instructions define “responsible party” as 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.” This definition is very general and, depending on the type of entity, the identity of the “responsible party” may not always be obvious. This is especially true if the entity does not have owners. If you are not sure about who should be reported as the “responsible party” of your entity, you should consult your attorney for assistance.

What Action Do I Need to Take?
In general, if your entity applied for its EIN prior to January 1, 2010, Form 8822-B should be filed by March 1, 2014 and should report only the most recent changes. Entities formed after January 1, 2010 must determine their “responsible party”; if that individual is not the person reported on the original Form SS-4, Form 8822-B should be filed by March 1, 2014. Going forward, entities must report changes in their “responsible party” within 60 days. The IRS has stated that the new requirement will affect a large number of entities in a small way since the time it takes to complete the form is minimal. Currently, Form 8822-B cannot be e-filed.

Form 8822-B and instructions are available on the IRS website at http://www.irs.gov/pub/irs-pdf/f8822b.pdf.