Who Is Your Company's "Responsible Party"?

by Davis Brown Law Firm
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When businesses apply for an EIN (employer identification number) with the IRS, the Form SS-4 Application (and the corresponding online application) asks for the name and SSN (if an individual) or EIN (if another entity) of the responsible party. The term “responsible party” refers to the individual who has a level of control over the funds or assets of the entity. In a business, the responsible party is typically the principal officer of the organization, the general partner, or the owner of a disregarded entity (such as an LLC).

Starting January 1, 2014, any entity with an EIN must file Form 8822-B to report a change in the identity of the responsible party. The form is to be filed within 60 days of the change. If the change in responsible party occurred prior to January 1, 2014, and you have not notified the IRS of the change, you must do so before March 1, 2014.

Form 8822-B was originally used by businesses to report a change of address or business location. With the August 2013 revisions, the same form is now used to report a change of responsible party (in addition to a change in address or business location).

The instructions state the form is mandatory if the responsible party has changed, but use of the form for changing an address is voluntary. Interestingly, despite the requirement to file if the responsible party has changed, the taxpayer will not be subject to penalties for failure to file, but the instructions note that failing to update information may result in not receiving certain notices of deficiencies or demands for tax, for which penalties and interest will continue to accrue despite failing to receive the notices.

Nevertheless, entities should consider alerting the IRS of a change in identity of their responsible party. The form is short (one page form and one page of instructions) and covers pretty basic information. The IRS estimates it will only take 18 minutes to complete and file the form, and I would estimate an even shorter time if you have all the information ready.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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