The Internal Revenue Service (IRS) has issued final regulations (T.D. 9617) (+2013 IRB LEXIS 257, May 3, 2013) requiring employers that have an employer identification number (EIN) to provide updated EIN application information to the IRS when required by forms, instructions or other guidance that the IRS plans to issue in the near future. The regulations, which are unchanged from the earlier proposed regulations (+77 F.R. 15004), are effective January 1, 2014.
The purpose of the regulations is effective tax administration. They will require employers to update names and taxpayer identification numbers within a certain timeframe if they have listed an individual other than a responsible party (e.g., a nominee) in a previous EIN application. This will eliminate the issue of employers listing individuals temporarily authorized to act on their behalf on EIN applications even when they are no longer so authorized.
With the new regulations, the IRS hopes to be better able to: (i) determine the correct ownership details for businesses with an EIN; and (ii) contact the proper individuals when attempting to resolve tax matters. The updated information will also help prevent tax system fraud or abuse that may occur due to the use of nominees in EIN applications, which results in the concealing of the true responsible party by employers that hide assets and income.