Calling it a key security issue, the IRS is asking businesses, nonprofits, and other entities to check their Employer Identification Number (EIN) application to make sure contact information is updated and accurate.
The IRS says it needs the correct contact information to notify taxpayers of suspected identity theft or other fraud issues related to EINs or business accounts. When the data about responsible parties for business-type entities is outdated or incorrect, it means the IRS faces a time-consuming process to find the correct person to contact about a suspicious filing.
The IRS said Friday it will step up awareness efforts aimed at businesses, partnerships, trusts and estates, charities and other entities that are EIN holders. In August, the IRS will begin by sending letters to 100,000 EIN holders whose responsible party information appears outdated.
IRS regulations require EIN holders to update responsible party information within 60 days of any change by filing Form 8822-B, Change of Address or Responsible Party – Business.
All EIN applications (mail, fax, electronic) must disclose the name and Taxpayer Identification Number (Social Security number, Individual Taxpayer Identification Number or EIN) of the true principal officer, general partner, grantor, owner or trustor.
The IRS defines a responsible party as the individual or entity who “controls, manages, or directs the applicant entity and the disposition of its funds and assets.”
Unless the applicant is a government entity, the party responsible must be an individual, not an entity. If there is more than one responsible party, the entity may list whichever party the entity wants the IRS to recognize as the responsible party.
EINs are to be used strictly for tax administration purposes. Entities with EINs that are no longer in use should close their IRS tax accounts and follow steps outlined at Canceling an EIN – Closing Your Account.