It’s More Than a Number - Center for Agricultural …...5/16/2017 1 Center for Agricultural Law &...

5/16/2017

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Center for Agricultural Law & Taxation

It’s More Than a Number

May 16, 2017

The Federal Identification Number/Employer Identification Number


The Most Common Question At CALT Surrounds the EIN#• Do You Need an EIN?

• Do You Need a New EIN?

• How to Apply for an EIN

• How Long Will it Take to Get a Number?

• Lost or Misplaced Your EIN?

• How EINs are Assigned and Valid EIN Prefixes

• Canceling an EIN – Closing Your Account

• Who is a Responsible Party?

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What is an EIN

• An Employer Identification Number (EIN) is also known as a Federal Tax Identification Number, and is used to identify a business entity

• Generally, businesses need an EIN

• A taxpayer may apply for an EIN in various ways including online

• The service is free service offered by the Internal Revenue Service – some offer the service for a fee, but IRS is FREE

• Generally using the online version, the EIN is assigned immediately

•

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Basics

• An Employer Identification Number (EIN) is a nine-digit number that IRS assigns in the following format: XX-XXXXXXX

• It is used to identify the tax accounts of employers and certain others who have no employees

• For employee plans, an alpha (for example, P) or the plan number (e.g., 003) may follow the EIN

• The IRS uses the number to identify taxpayers that are required to file various business tax returns

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Campus

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Basics

• EINs are used by employers, sole proprietors, corporations, partnerships, non-profit associations, trusts, estates of decedents, government agencies, certain individuals, and other business entities

• Use the EIN on all of the items that are sent to the IRS and the Social Security Administration (SSA).

• Caution: An EIN is for use in connection with business activities only

• Do not use the EIN in place of a social security number (SSN)

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One EIN Per Day

• Effective May 21, 2012, to ensure fair and equitable treatment for all taxpayers, the Internal Revenue Service 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 fax or mail

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One EIN for Enitity

• The client should have only one EIN for the same business entity

• Numerous Sole Proprietorships can operate under one EIN

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Special Rules Regarding Entity Classification Elections • There are special rules and procedures for

classification elections made on Form 8832, Entity Classification Election

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Form 8832

• An eligible entity uses Form 8832 to elect how it will be classified for federal tax purposes, as a corporation, a partnership, or an entity disregarded as separate from its owner

• An eligible entity is classified for federal tax purposes under the default rules unless it files Form 8832 or Form 2553, Election by a Small Business

• Corporation

• See

• Who Must File

• below.

• The IRS will use the information entered on

thi f t t bli h th tit ’ fili d

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Who Must File- Form 8832

• The IRS will use the information entered on the form to establish the entity’s filing and reporting requirements for federal tax purposes

• An entity must file Form 2553 if making an election under section 1362(a) to be an S corporation

• A new eligible entity should not file Form 8832 if it will be using its default classification

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Domestic Default Rule

• Unless an election is made on Form 8832, a domestic eligible entity is:

• 1. A partnership if it has two or more members.

• 2. Disregarded as an entity separate from its owner if it has a single owner

• A change in the number of members of an eligible entity classified as an association does not affect the entity’s classification - For purposes of this form, an association is an eligible entity taxable as a corporation by election or, for foreign eligible entities, under the default rules(see Regulations section 301.7701-3).

• However, an eligible entity classified as a partnership will become a disregarded entity when the entity’s membership is reduced to one member and a disregarded entity will be classified as a partnership when the entity has more than one member.

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Online Application

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Online Application

• The client must complete the application in one session, as they will not be able to save and return at a later time

• For security purposes, the session will expire after 15 minutes of inactivity, and the client will need to start over

• The EIN will be received immediately upon verification

• If the client wishes to receive the confirmation letter online, it is strongly recommended that they install Adobe Reader before beginning the application if it is not already installed

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Online Application

• If a third party designee (TPD) is completing the online application on behalf of the taxpayer, the taxpayer must authorize the third party to apply for and receive the EIN on his or her behalf

• The business location must be within the United States or U.S. territories

• Foreign filers without an Individual Taxpayer Identification Number (ITIN) cannot use this assistant to obtain an EIN

• If the entity is incorporated outside of the United States or the U.S. territories, they cannot apply for an EIN online

• Call 267-941-109915

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Trusts

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Form SS-4

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Form SS-4

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Form SS-4

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Form SS-4

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Typical Times an EIN is Needed

• Start a new business

• Hire employees

• Open a bank account – bank needs for banking purpose

• Change the type of organization

• Purchase an ongoing business

• Create a trust

• Created a pension plan as a plan administrator

• A foreign person needing an EIN to comply with IRS withholding regulations

• The administration of an estate

• Is a withholding agent for taxes on non-wage income paid to an alien (i.e., individual, corporation, or partnership, etc.)

• A state or local agency

• Is a single-member LLC

• Is an S corporation24

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Sounds Simple

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Start a New Business

• A a sole proprietorship or self-employed farmer who establishes a qualified retirement plan, or is required to file excise, employment, alcohol, tobacco, or firearms returns, must have an EIN

• A partnership, corporation, REMIC (real estate mortgage investment conduit), nonprofit organization (church, club, etc.), or farmers’ cooperative must use an EIN for any tax-related purpose even if the entity does not have employees

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Change the Type of Organization

• Either the legal character of the organization or its ownership changed (for example, you incorporate a sole proprietorship or form a partnership)

• However, do not apply for a new EIN if the existing entity only

• (a) changed its business name

• (b) elected on Form 8832 to change the way it is taxed (or is covered by the default rules), or

• (c) terminated its partnership status because at least 50% of the total interests in partnership capital and profits were sold or exchanged within a 12-month period

• The EIN of the terminated partnership should continue to be used. Regulations section 301.6109-1(d)(2)(iii)

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Purchases an Ongoing Business

• Never ever use the current businesses EIN

• Apply for an EIN under the business name

• This starts a new record and could become important if the other business owes back taxes or incurred penalties the client is unaware of at the time of purchase

• Create the businesses own history, do not be burden by old issues

• Exception, if you became the “owner” of a corporation by acquiring its stock

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Created a Trust

• The trust is other than a grantor trust or an IRA trust

• However, grantor trusts that do not file using Optional Method 1 and IRA trusts that are required to file Form 990-T, Exempt Organization Business Income Tax Return, must have an EIN

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Created a Pension Plan as a Plan Administrator • A plan administrator is the person or group of

persons specified as the administrator by the instrument under which the plan is operated

• Needs an EIN for reporting purposes

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Is a Foreign Person Needing an EIN to Comply with IRS Withholding Regulations

• Needs an EIN to complete a Form W-8 (other than Form W-8ECI), avoid withholding on portfolio assets, or claim tax treaty benefits

• Entities applying to be a Qualified Intermediary (QI) need a QI-EIN even if they already have an EIN, see Rev. Proc. 2000-12

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Administering an estate

• Needs an EIN to report estate income on Form 1041

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A State or Local Agency

• Serves as a tax reporting agent for public assistance recipients under Rev. Proc. 80-4, 1980-1

• If the taxpayer is an agent of a household employer that is a disabled individual or other welfare recipient receiving home care services through a state or local program, check the box Other and enter “Household employer agent” Rev. Proc. 84-33 and Rev. Proc. 2013-39

• If you're a state or local government, also check the box for state/local government

• State or local agencies may need an EIN for other reasons, for example, hired employees

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A Single-Member LLC

• Needs an EIN to file Form 8832, Classification Election, for filing employment tax returns and excise tax returns, or for state reporting purposes

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Disregarded Entities

• A disregarded entity is an eligible entity that is disregarded as separate from its owner for federal income tax purposes

• Disregarded entities include single-member limited liability companies (LLCs) that are disregarded as separate from their owners, qualified subchapter S subsidiaries (qualified subsidiaries of an S corporation), and certain qualified foreign entities

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• The disregarded entity is required to use its name and EIN for reporting and payment of employment taxes

• A disregarded entity is also required to use its name and EIN to register for excise tax activities on Form 637; pay and report excise taxes reported on Forms 720, 730, 2290, and 11-C; and claim any refunds, credits, and payments on Form 8849

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• If a disregarded entity is filing Form SS-4 to obtain an EIN because it is required to report and pay employment and excise taxes, or for non-federal purposes such as a state requirement, check the box Other for line 9a and write “Disregarded entity” (or “Disregarded entity-sole proprietorship” if the owner of the disregarded entity is an individual)

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• If the disregarded entity is requesting an EIN for purposes of filing Form 8832 to elect classification as an association taxable as a corporation, or Form 2553 to elect S corporation status, check the box

• Corporation for line 9a and write “Single-member” and the form number of the return that will be filed (Form 1120 or 1120S).

• If the disregarded entity is requesting an EIN because it has acquired one or more additional owners and its classification has changed to partnership under the default rules of Regulations section 301.7701-3(f), check the box Partnership for line 9a

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An S corporation

• Needs an EIN to file Form 2553, Election by a Small Business Corporation

• An existing corporation that is electing or revoking S corporation status should use its previously-assigned EIN

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Tips When Applying

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Tips

• When using the online system do not use any symbols

• Address is limited to 35 characters- provide the most essential address information (i.e., apartment numbers, suite numbers, etc – IRS will validate using the information entered

• If incorporated outside of the United States or the U.S. territories, you cannot apply for an EIN online

• All the EINs obtained on the Internet start with 20, 26, 27, 45, 46, 47, 81 or 82

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Tips

• No special software is needed

• The client may be required to enroll in EFTPS if they meet specific requirements

• For NEW Businesses IRS has a program called : Express Enrollment

• All businesses receiving a new EIN (Employer Identification Number) are pre-enrolled in the Electronic Federal Tax Payment System (EFTPS) enabling them to make all federal tax payments electronically at www.eftps.gov

• The EFTPS PIN package is mailed to the IRS address of record. (If less than 1 week since receiving your EIN) please wait, the PIN should arrive within 5 business days after receiving the EIN

• If more than one week since receiving your EIN, call EFTPS Customer Service at 1-800-555-4477 42

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Activating Enrollment in EFTPS

• Instructions for activating are included in the EFTPS PIN package

• Follow the steps in the “How to Activate Your Enrollment” brochure we have detailed them below

• 1. Call 1- 800-555-3453 and follow the automated instructions

• 2. Enter financial institution information (bank routing and account number)

• 3. Choose whether or not the taxpayer wished to have EFTPS verify the bank Information

• If they choose to verify the bank account information it will delay making a payment for 6-10 business days

• If they choose not to have the bank account number verified, they can begin making payments immediately after all activation steps have been complete

• The taxpayer is responsible for the accuracy of the number entered

• If it is incorrect, the financial institution may return the payment and the client may incur an IRS penalty for late payment. 43


Activating Enrollment in EFTPS

• 4. Authorize withdrawal of electronic payments from bank account

• 5. Enter phone number

• 6. Write down the confirmation number

• 7. The voice response system will offer the option of obtaining an Internet Password so you can make payments via the Internet

• 8. Within 7-10 days, taxpayers will receive an EFTPS Confirmation/Update Package by mail that contains a Confirmation/Update Form and an EFTPS Payment Instruction Booklet 44


Lost or Forgotten EIN

• IRS records will be updated immediately with the EIN

• Calling (800) 829-4933 and select EIN from the list of options

• Once connected with an IRS employee, explain the lost or forgotten situation

• The IRS employee will ask the necessary disclosure and security questions prior to providing the number

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Non-Received Confirmation Number or Password • Confirmation – 1-800-555-4477

• Password – 1-800-982-3526

• Call the above numbers for assistance

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Your History

• For each payment made through EFTPS, the client will receive an immediate acknowledgement number that can be used to track the payment and communicate with IRS

• This acknowledgement number acts as a receipt for the payment instructions

• The taxpayer can view payments via the Internet or call EFTPS Customer Service 1-800-555-4477 to verify payments and review up to 16 months of payment history

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Does the Client Need a New EIN?

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Sole Proprietorship

• The client will be required to obtain a new EIN if any of the following statements are true.

• They are subject to a bankruptcy proceeding

• They incorporate

• They take in partners and operate as a partnership

• They purchase or inherit an existing business that will be operated as sole proprietorship

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Sole Proprietorship

• The client will not be required to obtain a new EIN if any of the following statements are true

• They change the name of the business

• They change the location and/or add other locations

• They operate multiple businesses as sole proprietorships

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Changing Name How to Report

• Business owners and other authorized individuals can submit a name change for their business

• The specific action required may vary depending on the type of business

• If the EIN was recently assigned and filing liability has yet to be determined, send Business Name Change requests to IRS-Stop 343, Cincinnati, OH 45999

• In some situations a name change may require a new Employer Identification Number (EIN) or a final return 51

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Chart to Assist

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Change of Address and How to Report – Form 8822-B

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Corporations

• The client will be required to obtain a new EIN if any of the following statements are true

• A corporation receives a new charter from the secretary of state

• The corporation is a subsidiary of a corporation using the parent's EIN or they become a subsidiary of a corporation

• They change to a partnership or a sole proprietorship

• A new corporation is created after a statutory merger 54

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Corporations


• They are a division of a corporation

• The surviving corporation uses the existing EIN after a corporate merger

• A corporation declares bankruptcy

• The corporate name or location changes

• A corporation chooses to be taxed as an S corporation

• Reorganization of a corporation changes only the identity or place

• Conversion at the state level with business structure remaining unchanged

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Partnerships


• They incorporate

• The partnership is taken over by one of the partners and is operated as a sole proprietorship

• They end an old partnership and begin a new one

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Partnerships


• The partnership declares bankruptcy

• The partnership name changes

• They change the location of the partnership or add other locations

• A new partnership is formed as a result of the termination of a partnership under IRC §708(b)(1)(B)

• 50 % or more of the ownership of the partnership (measured by interests in capital and profits) changes hands within a twelve-month period (terminated partnerships under Reg. §301.6109-1)

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Limited Liability Company (LLC)

• An LLC is an entity created by state statute

• The IRS did not create a new tax classification for the LLC when it was created by the states

• Instead IRS uses the tax entity classifications it has always had for business taxpayers:

• Corporation

• Partnership, or

• Disregarded as an entity separate from its owner, referred to as a “disregarded entity”

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Limited Liability Company (LLC)

• An LLC is always classified by the IRS as one of these types of taxable entities

• If a “disregarded entity” is owned by an individual, it is treated as a sole proprietor

• If the “disregarded entity” is owned by any other entity, it is treated as a branch or division of its owner

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Changes affecting Single Member LLCs with Employees or Other Taxes• For wages paid on or after January 1, 2009, single member/single

owner LLCs that have not elected to be treated as corporations may be required to change the way they report and pay federal employment taxes and wage payments and certain federal excise taxes

• On Aug. 16, 2007, changes to Treasury Regulation § 301.7701-2 were issued

• The new regulations state that the LLC, not its single owner, will be responsible for filing and paying all employment taxes on wages paid on or after January 1, 2009

• These regulations also state that for certain excise taxes, the LLC, not its single owner, will be responsible for liabilities imposed and actions first required or permitted in periods beginning on or after January 1, 2008

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Changes affecting Single Member LLCs with Employees or Other Taxes• If a single member LLC has been filing and paying

employment taxes under the name and EIN of the owner, and no EIN was previously assigned to the LLC, a new EIN will be required for wages on or after January 1, 2009 and excise tax paid on or after January 1, 2008

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Examples

• If the primary name on the account is John Doe, a new EIN will be required

• If the primary name on the account is John Doe and the second name line is Doe Plumbing (which was organized as an LLC under state law), a new EIN is required

• If the primary name on the account is Doe Plumbing LLC, a new EIN will not be required

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Changes affecting Single Member LLCs with Employees or Other Taxes• The client will be required to obtain a new EIN if any of

the following statements are true• A new LLC with more than one owner (Multi-member LLC) is

formed under state law

• A new LLC with one owner (Single Member LLC) is formed under state law and chooses to be taxed as a corporation or an S corporation

• A new LLC with one owner (Single Member LLC) is formed under state law, and has an excise tax filing requirement for tax periods beginning on or after January 1, 2008 or an employment tax filing requirement for wages paid on or after January 1, 2009

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Changes affecting Single Member LLCs with Employees or Other Taxes


• They report income tax as a branch or division of a corporation or other entity, and the LLC has no employees or excise tax liability

• An existing partnership converts to an LLC classified as a partnership

• The LLC name or location changes.

• An LLC that already has an EIN chooses to be taxed as a corporation or as an S corporation

• A new LLC with one owner (single member LLC) is formed under state law, does not choose to be taxed as a corporation or S corporation, and has no employees or excise tax liability

• NOTE: You may request an EIN for banking or state tax purposes, but an EIN is not required for federal tax purposes 64


Estates


• A trust is created with funds from the estate (not simply a continuation of the estate)

• The client represents an estate that operates a business after the owner's death

• The client will not be required to obtain a new EIN if any of the following statement is true

• The administrator, personal representative, or executor changes his/her name or address

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Trusts


• One person is the grantor/maker of many trusts

• A trust changes to an estate

• A living or intervivos trust changes to a testamentary trust

• A living trust terminates by distributing its property to a residual trust

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Trusts


• The trustee changes

• The grantor or beneficiary changes his/her name or address

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Change in Fiduciary's Address

• If the same fiduciary who filed the prior year's return (or Form SS-4 if this is the first return being filed) files the current year's return and changed the address on the return (including a change to an "in care of" name and address), and didn't report the change on Form 8822-B, the appropriate box on Form 1041

• If the address shown on Form 1041 changes after fining the form (including a change to an "in care of" name and address), file Form 8822-B to notify the IRS of the change

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Change of Name or Address

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Change of Name or Address

• If the fiduciary changed his or her name from the name that he or she entered on the prior year's return (or Form SS-4 if this is the first return being filed), be sure to check the required box on Form 1041

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Current Systemic - Return Due Dates Provided on CP575 Notices• If you have recently applied for a Federal Identification

Number, some of the return due dates are wrong on the assignment notice of the EIN the client will receive

• Due to a change in return due dates for Partnerships and certain Corporations, the CP575 notice may be incorrect for tax periods ending after 12/31/2015

• When you apply for a client or the client brings in the CP 575 please review for accuracy. Sample below with the wrong filing date for a calendar year corporation

• When filing any tax return, use the most current version of the form and instructions for the entity type to ensure timely filing 71


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The Scoop – Upcoming Dates

• May 17

• May 31

• June 7

• June 21

• July 5

• July 19

• August 2

• August 16

• Held at 8:00 am and 12:00 pm Central time

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Upcoming Seminars – Mark Your Calendar – Final Dates

• September 21, 2017 Ag Law Seminar, Live and Webinar

• September 22, 2017 Farm and Estate Tax Review, Live and Webinar

• S Corporation and Entity Review – July 20-21, 2017, Live and Webinar

• Retirement and Social Security Issues(Webinar) = October 10-11, 2017

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Upcoming Webinars

• June 8 - Part 1 - Form 3115 {Comprehensive Overview} Part 2 is on June 15

• June 13 - Form 4797 - Sale of a Business Asset

• June 14 - ACA - Where Are We with Repeal/Replace, Status Update and Other Issues

• June 20 – My Client Dies What’s Next

• June 22 - The Fundamentals of Trusts

• June 27 - Payment of Wages with Commodities and Gifting Grain

• June 29 - Handling Tax Returns for Religious Groups –Amish and Mennonite 75

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The Schedule is Finalized for the 44th Annual Federal Income Tax Schools

• November 2-3, 2017 – Maquoketa, Iowa – Centerstone Inn and Suites

• November 6-7, 2017 – Le Mars, Iowa – Le Mars Convention Center

• November 8-9, 2017 – Atlantic, Iowa – Cass County Community Center

• November 9-10, 2017 – Mason City, Iowa – North Iowa Area Community College

• November 16-17, 2017 – Ottumwa, Iowa – Indian Hills Community College

• November 20-21, 2017 – Waterloo, Iowa – Hawkeye Community College

• December 11-12, 2017 – Ames, Iowa and Live Webinar – Quality Inn and Suites


Free Webinar: 4th Annual Taxpayer Advocate Town Hall Meeting

• June 28, 2017 - Online

• With tax reform on the horizon, and the IRS budget dwindling, it’s time to inform the Iowa Taxpayer Advocate of your concerns and other issues that impact the tax profession. Join us for this opportunity, as one voice can make a difference, and even a small stone creates ripples in the pond.

• June 28, 2017 - Noon to 1 PM (CST) - No CPE provided for this free webinar

• To register: https://attendee.gotowebinar.com/register/3954086087709739267

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The CALT Staff

William EdwardsInterim Director for the Beginning Farmer CenterInterim Director for the Center for Agricultural Law and [email protected] Heady518 Farm House LnAmes. Iowa 50011

Kristine A. Tidgren

Assistant Director

E-mail: [email protected]

Phone: (515) 294-6365

Fax: (515) 294-0700

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The CALT Staff

Kristy S. MaitreTax SpecialistE-mail: [email protected]: (515) 296-3810Fax: (515) 294-0700

Tiffany L. Kayser

Program Administrator

E-mail: [email protected]

Phone: (515) 294-5217

Fax: (515) 294-0700

It’s More Than a Number - Center for Agricultural …...5/16/2017 1 Center for Agricultural Law &...

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Transcript of It’s More Than a Number - Center for Agricultural …...5/16/2017 1 Center for Agricultural Law &...