Have You Told The IRS That Your “Responsible Party” Has Changed?

The bloggers who bring you BenefitsNotes.com are attorneys at Leonard, Street and Deinard. We are proud to announce that we will merge with Stinson Morrison Hecker on January 1, 2014, to form the firm of Stinson Leonard Street. You can learn more about our new firm at http://stinsonleonardmerger.com/.

We welcome guest blogger Sam Butler, an associate at Stinson Morrison Hecker and soon to be an associate at Stinson Leonard Street, on a topic of interest to those responsible for benefit plans.

Beginning on January 1, 2014, any entity with an employer identification number (EIN) issued by the Internal Revenue Service (IRS) must report a change in the identity or address of its “responsible party” within 60 days of the change by filing a Form 8822-B. Although we as lawyers do not typically obtain EINs for qualified retirement plan trusts, we understand that such trusts often obtain an EIN separate from the plan sponsor’s EIN.  While the IRS tracks the identity of a qualified plan using the plan sponsor’s EIN and a plan number, the trust often wants a separate EIN to use in opening plan accounts so that the income is reported to the EIN of the tax exempt trust, rather than the EIN of the plan sponsor. Entities – including qualified plan trusts – must name their responsible party when applying for an EIN using IRS Form SS-4.  Filing a Form 8822-B will allow entities to update the information they provided regarding their responsible party when requesting an EIN.

In the instructions for Form 8822-B, the IRS takes the position that any entity with an EIN must file the form if its responsible party has changed.  Despite describing the form as mandatory in these circumstances, the instructions also state that a failure to file the form will not result in penalties.  Nevertheless, taxpayers should consider alerting the Service of any change in the identity of their responsible party or its contact information because if the IRS does not have the most current information, it is possible that the taxpayer will not receive notices of deficiency or notices of demand for tax.  Despite the failure to receive such notices, penalties and interest will continue to accrue on any tax deficiencies.  Furthermore, complying with the Form 8822-B mandate should be relatively easy, as the IRS estimates the average time needed to complete and file the form is 18 minutes.

Entities that experienced a change in responsible party prior to January 1, 2014, have until March 1, 2014, to file a Form 8822-B disclosing their new responsible party.