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Proposed regulations would require EIN owners to update responsible person information

March 13, 2012 | No. 2012-141


The Treasury Department and IRS today released for publication in the Federal Register proposed regulations (REG-135491-10) requiring any person assigned an employer identification number (EIN) to provide updated information to the IRS to enable the IRS to maintain accurate information regarding such persons.

Overview

The reason for the proposed regulations is that with increasing frequency, employers / EIN applicants authorize individuals—e.g., nominees who are listed on the EIN application, typically principal officers, general partners, grantors, owners, and trustors—to act on the EIN applicants’ behalf, but that this authority is often temporary and expires after the EIN application process is completed.

According to the preamble to today’s proposed regulations, the EIN applicant’s use of a nominee “…prevents the IRS from gathering correct ownership information with respect to the EIN applicant once the nominee is no longer authorized to act on behalf of the EIN applicant.”

The IRS has already revised line 7a on Form SS-4 (effective January 2010), requiring disclosure of the name of the EIN applicant’s “responsible party” and that person’s taxpayer identification number.

Today’s proposed regulations further require any person issued an EIN to provide updated information to the IRS in the manner and frequency required by forms, instructions, or other appropriate guidance which the IRS could issue in the near future. This includes updated application information regarding the name and taxpayer identification number of the responsible party.

The updated responsible party information is intended to allow the IRS to ascertain correct ownership details for persons who have an EIN. As noted in the preamble, the IRS can use that information to contact the appropriate persons when resolving a tax matter related to a business with an EIN and to address “schemes that abuse the tax system through the use of nominees.”

Today’s regulations are proposed to apply to all persons possessing an EIN after the date the final regulations are published in the Federal Register.

Comments and request for a public hearing on the proposed regulations must be received by a date that is 90 days after the proposed regulations appear in the Federal Register which is scheduled for Wednesday, March 14, 2012.

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ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY KPMG TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.

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