In a recent letter submitted to the Department of the Treasury and the Internal Revenue Service (IRS), the American Institute of CPAs (AICPA) expressed concerns with the timing currently involved with the procedure for business entities organized in the U.S. where the responsible party does not have a social security number or an individual taxpayer identification number needed to obtain an employer identification number (EIN).
An EIN is required for entities to obtain when starting a business or engaging in transactions in the U.S. It is used to open bank accounts, apply for business licenses, register with government agencies and submit many other applications, including paying and filing tax returns. The application is made with the IRS using one of three methods: online, by fax or mail, or by telephone.
The comments, which refer to Form SS-4, Application for EIN, request a change in the IRS EIN issuance procedures for certain entities. The AICPA recommends that the IRS change its issuance procedures and allow entities that are organized in the U.S. with a responsible person that lacks a tax identification number to be able to call the IRS and obtain the EIN over the phone, as entities organized outside the U.S. currently may do. This echoes recommendations submitted by the IRS Advisory Council.
New Beneficial Ownership Information (BOI) reporting requirements established by the Corporate Transparency Act (CTA) adds additional concerns due to the 30-day turnaround time required by the CTA for entities organized on or after January 1, 2025. The BOI rules require entities to include their EIN on their initial BOI report filed with the Treasury Department.
The AICPA is particularly concerned that, as a result of the new BOI reporting requirements, it will be very difficult, if not impossible in some cases, for entities to meet the 30-day filing deadline that applies for entities organized or registered on or after January 1, 2025.
“Businesses have their hands tied until and unless they are able to obtain an EIN,” said Melanie Lauridsen, Vice President of Tax Policy and Advocacy with the American Institute of CPAs. “The current procedures cause significant delays, impacting many critical business functions, as well as impacting the use of electronic payments and the filing of election forms and returns that can result in notices and penalties. AICPA believes this change makes sense and we urge the IRS to consider our recommendation.”