Taxpayers are requiring to have a taxpayer identification number to file returns and provide to payors, so that their tax data can be adequately tracked and reported. While most U.S. individuals will use their social security number, entities (such as corporations, trusts, partnerships, and LLC’s) have to apply to the IRS for a number (an employer identification number, or EIN) using Forms SS-4.
In recent years, the IRS has helped the process by allowing for the issuance of EINs by fax, telephone, and online, in addition to the traditional mail method. This is helpful since many times a number is needed ASAP to file a return, provide to a payor, or open a bank or brokerage account.
Those businesses or persons who form multiple entities may now suffer the inconvenience of being able to obtain only one EIN per day. When a Form SS-4 is submitted, it requires information on a “responsible party” for the entity. More precisely, a “responsible party” is subject to this once-a-day limit. The responsible party generally is the principal officer, partner, or member as to a business entity or a grantor, owner, or trustee as to a trust.
The IRS notice on this is posted on the IRS website for the instructions for the Form SS-4 and reads:
Limit of one (1) Employer Identification Number (EIN) Issuance per Business Day
Effective May 21, 2012, to ensure fair and equitable treatment for all taxpayers, the Internal Revenue Service (IRS) will limit Employer Identification Number (EIN) issuance to one per responsible party per day. This limitation is applicable to all requests for EINs whether online or by phone, fax or mail. We apologize for any inconvenience this may cause.
“Fair and equitable?” I am not sure what that means. And what do they mean as to mail? Does it mean I can’t mail them on the same day, or they can’t arrive at the IRS at the same day, or the IRS can’t process them on the same day? What will the IRS do – mail them back without issuing them so I don’t know there is a problem until weeks after I mailed them, or put them in a pile to do one a day? How is the taxpayer to know what is occurring with their mailed in applications? The whole situation is Kafkaesque – the government is requiring entities to get an EIN, but then refusing to issue them.
What happens if multiple entities are formed and a tax return deadline is looming? Or if it is necessary to open and operate bank accounts?
Now perhaps there are multiple responsible parties for the multiple entities - that could allow for multiple applications on the same day. But if that is not the case, these taxpayers may have some problems.
Note that the “responsible party” is not the same as a Third Party Designee who can apply for a number on behalf of an entity. Those designees can still apply for up to five numbers a day – however, if the entities they are applying for have the same responsible party they presumably will have the same one-a-day limit for those entities.a