Standard Federal Tax Explanations related to §6109
FEDERAL INCOME TAX
Identifying Numbers
Significant developments - proposed regulations: tax return preparers. -- ... 2008FED ¶36,965.002
Synopsis - identifying numbers defined. -- ... 2008FED ¶36,965.01
Identifying numbers for foreign persons. -- ... 2008FED ¶36,965.021
Types of identifying numbers. -- ... 2008FED ¶36,965.022
Securing Identification Numbers
Securing Social Security account numbers. -- ... 2008FED ¶36,965.024
Securing IRS-issued taxpayer identification numbers (ITINs). -- ... 2008FED ¶36,965.026
Securing employer identification numbers. -- ... 2008FED ¶36,965.028
Securing IRS adoption taxpayer identification numbers (ATINs). -- ... 2008FED ¶36,965.03
Use of Identification Numbers
Use of Social Security account numbers by state or political subdivision. -- ... 2008FED ¶36,965.032
Use of identifying number by certain grantor trusts. -- ... 2008FED ¶36,965.033
Seller-provided financing. -- ... 2008FED ¶36,965.034
Joint return and payment of estimated tax. -- ... 2008FED ¶36,965.035
Requesting identifying numbers. -- ... 2008FED ¶36,965.036
Use of employer identification numbers by sole proprietors and fiduciaries. -- ... 2008FED ¶36,965.037
Use of identifying numbers, changes in business entities. -- ... 2008FED ¶36,965.038
Access to EINs by Secretary of Agriculture. -- ... 2008FED ¶36,965.039
Tax return preparers. -- ... 2008FED ¶36,965.04
Penalties
Penalties. -- ... 2008FED ¶36,965.068
Misuse of Social Security number. -- ... 2008FED ¶36,965.0682
Proposed regulations: tax return preparers. -- ... 2008FED ¶36,965.08
Identifying Numbers: Significant developments - proposed regulations: tax return preparers
Proposed regulations have been issued regarding amendments to the tax return preparer penalties under Code Secs. 6694 (¶39,956C) and 6695 (¶39,970), and related provisions under Code Secs. 6060 (¶36,562), 6107 (¶36,922), 6109, 6696 (¶39,980), and 7701(a)(36) (¶43,114), made by the Small Business and Work Opportunity Act of 2007 (P.L. 110-28). See ¶49,807 and ¶36,965.08.
Identifying Numbers: Synopsis - identifying numbers defined
Any person required to make a return, statement, or other document must furnish their identifying number as required by the forms and related instructions (Code Sec. 6109(a)(1)). A person may also be required to furnish their identifying number to another person or request an identifying number from another person (see ¶36,965.036) (Code Sec. 6109(a)(2)-(3)).
Identifying Numbers: Identifying numbers for foreign persons
The general requirement of providing a TIN (see ¶36,965.01) applies to certain foreign persons. Any foreign person who makes a return of tax must furnish its TIN on the return. A return includes an income, gift, or estate tax return, an amended return, or a refund claim. Information returns, however, are not returns for this purpose. Also subject to the TIN requirements are foreign persons (1) with income effectively connected with the conduct of a U.S. trade or business, (2) with a U.S. office or place of business or a U.S. fiscal or paying agent, and (3) who are required to have TINs for returns, statements or other documents under the regulations of Code Secs. 897 and 1445 (rules that apply to the transfer of U.S. real property interests). Foreign persons who make an Entity Classification Election under Reg. §301.7701-3(c) and nonresident alien individuals treated as residents under the joint return rules of Code Sec. 6013(g) and (h) must obtain TINs as well (Reg. §301.6109-1(b)(2)).
The TIN requirements also apply to a foreign person that furnishes certain withholding statements, to the extent required in Reg. §1.1441-1(e)(4)(vii) (Reg. §301.6109-1(b)(2)(vi)). For example, a foreign individual is generally required to put the individual's TIN on the Form W-8BEN or Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual (Reg. §1.1441-6(b)(1)). See ¶26,805.0515 and ¶32,716.034.
Foreign persons may also need to provide TINs under the rules that require withholding tax on a foreign partner's share of effectively connected income (Reg. §301.6109-1(b)(2)(viii)). See ¶32,801.
Persons besides the foreign person who are required to make a return, statement or other document (e.g., a transferee as a withholding agent) are required to furnish the TINs of those foreign persons described in Reg. §301.6109-1(b)(2) (Reg. §301.6109-1(c)).
See also the discussion of IRS-issued TINs for foreign persons at ¶36,965.026.
Identifying Numbers: Types of identifying numbers
Except as otherwise provided by regulations, an individual's social security account number (SSN) is his or her identifying number for tax purposes (Code Sec. 6109(d); Reg. §301.6109-1(a)(1)(ii)(A); Reg. §301.7701-11). The IRS can approve alternatives to social security numbers for use as identifying numbers by tax return preparers (Code Sec. 6109(a)).
Persons other than individuals and their estates, where required, must use employer identification numbers (EINs) for tax purposes (Reg. §301.6109-1(a)(1)(ii)(C)-(D); Reg. §301.7701-12). Persons other than individuals and their estates include not only corporations, but also employers, trusts, partnerships, payors of dividends and interest, and others required to file information returns, except household employers and employee representatives. See ¶36,965.028.
IRS individual taxpayer identification numbers (ITINs) must be used by certain foreign persons (individuals who do not qualify for participation in the social security program) (Reg. §301.6109-1(a)(1) and Reg. §301.6109-1(d)(3)). See ¶36,965.026.
IRS adoption taxpayer identification numbers (ATINs) may be issued to prospective adoptive parents (Reg. §301.6109-1(a)(1)(i)). See ¶36,965.03.
An employer identification number contains nine digits separated by a hyphen as follows: 00-0000000. A Social Security account number, an IRS individual taxpayer identification number and an IRS adoption taxpayer identification number also contain 9 digits, but the digits are separated as follows: 000-00-0000 (Reg. §301.6109-1(a)(1)(i)).
As mentioned above, identifying numbers are to be furnished as required by the forms and instructions related to them (Reg. §301.6109-1). It should be noted, however, that many of the rulings issued by the IRS (see ¶36,965.11 et seq.) were issued under prior regulations, effective before April 16, 1974, which provided specific rules for using identifying numbers (Reg. §1.6109-1(b)).
Missing or incorrect identification numbers can result in penalties under Code Sec. 6721 through Code Sec. 6724 (see ¶36,965.068) and backup withholding on reportable payments under Code Sec. 3406 (see ¶33,654.01 et seq.). Additionally, valid identification numbers are a requirement for claiming personal exemptions under Code Sec. 151 (¶8005.03), the child and dependent care credit under Code Sec. 21 (¶3507.075), the earned income credit under Code Sec. 32 (¶4082.025), the credit for higher education under Code Sec. 25A (¶3830), and the child tax credit under Code Sec. 24 (¶3770).
Identifying Numbers: Securing Identification Numbers: Securing Social Security account numbers
An individual who needs a Social Security account number must file an application on Form SS-5, the Application for Social Security Account Number (or Replacement of Lost Card) (Reg. §301.6109-1(d)(1)). This form can be obtained at any Social Security Administration office.
All information asked for on the application form must be filled in. In due time the individual will be forwarded a card showing the name of the individual and the Social Security account number assigned to him.
Identifying Numbers: Securing Identification Numbers: Securing IRS-issued taxpayer identification numbers (ITINs)
Generally, the Social Security Administration only issues social security numbers to U.S. citizens, alien individuals legally admitted to the United States for permanent residency, or other immigration categories that authorize U.S. employment (Reg. §301.6109-1(d)(4) and (g)). When a resident or nonresident alien individual does not have, or is unable to obtain, a social security number, an IRS-issued TIN referred to as an "IRS individual taxpayer identification number" (ITIN) must be used (Reg. §301.6109-1(d)(3)). An individual can apply for an ITIN on Form W-7, Application for IRS Individual Taxpayer Identification Number, or on any other form authorized by the IRS. The individual must submit acceptable documentary evidence to establish alien status and identity, as required by the IRS. Examples of such evidence include an original passport, driver's license, birth certificate, identity card or immigration documentation (Reg. §301.6109-1(d)(3)(iii)).
The application form for an ITIN (and/or an employer identification number, see ¶36,965.028) may be submitted directly to the IRS or the applicant may use an acceptance agent (Reg. §301.6109-1(d)(3)(iv)). An acceptance agent is a person or entity, such as a financial institution or an educational institution, who is authorized in writing by the IRS to assist alien individuals and other foreign persons in obtaining TINs and EINs from the IRS (Rev. Proc. 96-52, ¶36,965.10). A taxpayer must waive the nondisclosure provisions of Code Sec. 6103 when the taxpayer acts through an acceptance agent (Reg. §1.6109-1(g)(3)). Withholding agents may enter into special acceptance agreements with the IRS that exempt withholding certificates claiming reduced treaty withholding from the TIN requirement in the case of certain unexpected payments (Reg. §1.1441-6(g)). See ¶26,805.0515 and ¶32,716.046).
To make sure the ITINs are issued for tax purposes only, the IRS requires that Form W-7 be attached to the individual's income tax return. Individuals who apply for an ITIN to report income under an income tax treaty or to report income from U.S. bank or brokerage accounts are exempt from this requirement. Other exemptions exist for individuals who seek an ITIN to provide to a mortgage lender or in the case of a disposition of a U.S. real property interest (Instructions for Form W-7 (Rev. 01-2005), see also Notice 2004-1, at ¶36,965.1702).
Identifying Numbers: Securing Identification Numbers: Securing employer identification numbers
An employer needing an employer identification number (EIN) is required to file an application on Form SS-4 (Reg. §301.6109-1(d)(2)). This form may be obtained from any Internal Revenue Service Office, U.S. consular office abroad, or an acceptance agent described at ¶36,965.026 and ¶36,965.10. The application, together with any supplementary statement, must be prepared in accordance with the form and instructions, and must set forth fully and clearly the data requested. The application must be signed by:
(1) the individual, if the person is an individual;
(2) the president, vice president, or other principal officer, if the person is a corporation;
(c) a responsible and duly authorized member or officer having knowledge of its affairs, if the person is a partnership or other unincorporated organization; or(d) the fiduciary, if the person is a trust or estate.
Note that the signature requirement has been temporarily waived in connection with the IRS's development of procedures for accepting signatures in digital or electronic form (see Notice 2000-19, at ¶36,965.145).
The IRS's online application process for EINs is also available. Taxpayers wishing to request an EIN should go to irs.gov, enter the requested information and receive an EIN that is immediately recognized by the IRS. Help screens are available to assist with the requested information and taxpayers have the option of printing the confirmation notice (IRS News Release 2007-161, at ¶36,965.145).
Application for an EIN can also be made by phone or Fax machine. These methods allow a taxpayer to receive the EIN more quickly than if the Form is mailed. In addition, businesses can obtain an EIN directly from the IRS Web Site www.irs.gov. (see IR-2003-77, June 13, 2003, at ¶36,965.145).
In order to minimize the burden of filing numerous separate applications for EINs for each estate or trust, fiduciaries or other persons authorized to represent 10 or more estates or trusts in federal tax matters, or to execute and file tax returns in their behalf, may presently file a consolidated application requesting a block of EINs for such estates or trusts in advance of filing the returns. The volume submitter must make a written request for the EINs to the Entity Control Section of the IRS for the region in which the volume submitter has his legal residence or principal place of business. Within 30 days of receipt of the pre-supplied block of EINs, the volume submitter must assign the EINs to specific estates or trusts and must then submit a list of the estates and trusts with their assigned numbers to the local service center. Certain prescribed information must also be provided, including the name of the party making the request, the type of trust, if applicable, the exact name of the estate or trust, along with the name of the decedent or grantor, the name of any beneficiary, if applicable, and the date the estate or trust was established. Once this list and information are recorded, the service center will return a copy of the list to the submitter. Unassigned pre-supplied numbers outstanding 45 days after issuance by the IRS Service Center will be automatically cancelled (Rev. Proc. 89-37, ¶36,965.15).
When is an EIN needed ? A Form SS-4 should be filed if the applicant does not have an EIN, but will need to show an EIN on a return, statement or other document. The Instructions to Form SS-4 list the following scenarios in which an EIN may be needed and for which the applicant:
(1) starts a new business and does not currently have or expect to have employees;
(2) hires employees, including household employees, and does not have an EIN;
(3) opens a bank account;
(4) changes the type of organization, either the legal character of the organization or its ownership is changed (e.g., incorporate a sole proprietorship or form a partnership). Note that an EIN is not needed if an existing entity only changes its business name, elects on Form 8832 to change the way it is taxed, or terminates 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 (Reg. §301.6109-1(d)(2)(iii));
(5) purchases a going business and does not already have an EIN;
(6) creates a trust, other than a grantor trust or an IRA trust. Note that IRA trusts are required to file Form 990-T, Exempt Organization Business Income Tax Return, which requires an EIN;
(7) creates a pension plan as a pension plan administrator and needs an EIN for reporting purposes
(8) is a foreign person in need of an EIN to comply with IRS withholding regulations (e.g., completion of Form W-8 (other than Form W-8ECI) or to avoid withholding on portfolio assets or to claim tax treaty benefits. Note that a qualified intermediary (QI) will need a QI-EIN even if they already have an EIN;
(9) administers an estate and needs an EIN to report estate income on Form 1041;
(10) is a withholding agent for taxes on non-wage income paid to an alien individual, corporation or partnership, etc., and is an agent, broker, fiduciary, manager, tenant or spouse who is required to file Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons;
(11) is a state or local agency that serves as a tax reporting agent for public assistance recipients under Rev. Proc. 80-4, 1980-1 CB 581;
(12) is a single-member LLC and needs an EIN to file Form 8832, Classification Election, for filing employment tax returns or for state reporting purposes. Note that most LLCs do not need to file this form;
(13) is an S corporation and needs an EIN to file Form 2553, Election by a Small Business Corporation. Note that an existing corporation that elects or revokes S corporation status should use its previously-assigned EIN.
See also Publication 1635, Understanding Your EIN.
Identifying Numbers: Securing Identification Numbers: Securing IRS adoption taxpayer identification numbers (ATINs)
The IRS is authorized to issue adoption taxpayer identification numbers (ATINs) for a "prospective adoptive child" (Reg. §301.6109-3). The ATIN is a temporary identification number assigned to a prospective adoptive child in situations in which the Social Security Administration will not issue a social security number for the child. Without the ATIN, a prospective adoptive parent would be unable to meet the TIN requirements necessary to claim the dependent care credit under Code Sec. 21, the child tax credit under Code Sec. 24 and the dependency exemption under Code Sec. 151. Once the adoption is final, the prospective adoptive parent must apply for a SSN for the child (Reg. §301.6109-3(a)(1)). The ATIN will expire two years after it is assigned unless the IRS grants an extension (Reg. §301.6109-3(a)(2)).
A prospective adoptive parent is an individual in whose household a prospective adoptive child is placed by an authorized placement agency, as defined in Reg. §1.152-2(c), for legal adoption (Reg. §301.6109-3(b)(1) and Reg. §301.6109-3(b)(3)). A prospective adoptive child is a child who has not been adopted, but who has been placed in the household of a prospective adoptive parent for legal adoption by an authorized placement agency (Reg. §301.6109-3(b)(2)).
The ATIN procedures do not generally apply to adoptions of: (1) foreign (alien) children; (2) foster children; (3) children of a relative; and (4) children in cases in which the adoptive parent and birth parent share information about the child and themselves. In the case of a foreign child, the adopting parent should obtain an individual taxpayer identification number (ITIN) from the IRS. See ¶36,965.026. In situations (2) through (4), a social security number can usually be obtained for the child.
A prospective adoptive parent may apply for an ATIN if the following requirements are met (Reg. §301.6109-3(c)(1)):
(1) the prospective adoptive parent must be eligible to claim the personal exemption under Code Sec. 151 with respect to the child;
(2) an authorized placement agency must place the child with the prospective adoptive parent for legal adoption;
(3) the Social Security Administration will not process an application for an SSN on behalf of the child (for example, because the adoption is not final); and
(4) the prospective adoptive parent, having used all reasonable means, is unsuccessful in obtaining the child's assigned SSN.
An application for an ATIN is made on Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions, or any other form prescribed by the IRS. The application must also include documentary evidence required by the IRS to establish that the child was placed in the prospective parent's household by an authorized placement agency for legal adoption. Acceptable documentation may include a copy of the placement agreement entered into between the parents and the placement agency or a document authorizing the release of the newborn child to the prospective parents for adoption (Reg. §301.6109-3(c)(2)).
Identifying Numbers: Use of Identification Numbers: Use of Social Security account numbers by state or political subdivision
Any state or political subdivision may use Social Security account numbers to establish the identity of individual taxpayers, general public welfare recipients, drivers and motor vehicle registrants within its jurisdiction (Conference Committee Report on P.L. 94-455 (S. Conf. Rep. No. 94-1236) (Tax Reform Act of 1976), ¶36,960.03). The state or political subdivision may require these individuals to furnish their Social Security account number.
Identifying Numbers: Use of Identification Numbers: Use of identifying number by certain grantor trusts
The regulations provide that grantor trusts described in Reg. §1.671-4(b)(2)(i)(A) (¶24,685) are not to obtain employer identification numbers. The grantor of such a trust is required to furnish his Social Security account number or, if applicable, his employer identification number to payors of income. Payees must report income as if paid to the grantor, not the trust (Reg. §301.6109-1(a)(2)).
The death of a grantor, however, may require that a TIN be obtained. A trust that is treated as owned by a decedent under the grantor trust rules (Code Sec. 671 et seq.) must obtain a new TIN following the death of the decedent if the trust is to continue after the decedent's death (Reg. §301.6109-1(a)(3)(i)(A)). Payors must be furnished with a new Form W-9, Request for Taxpayer Identification Number and Certification, containing the new TIN, the name of the trust and the address of the trustee (Reg. §301.6109-1(a)(3)(ii)). If a trust is treated as owned by two or more grantors or other persons, it may continue to report under its TIN following the death of one of the owners if the portion owned by the decedent remains part of the original trust (Reg. §301.6109-1(a)(3)(i)(B)).
Code Sec. 645 trusts treated as part of estate.The executor and trustee of a qualified revocable trust (QRT) can elect under Code Sec. 645 to have the trust treated and taxed for income tax purposes as part of the estate, rather than a separate trust, during the election period. The election entitles the trust to income tax treatment that would only be available to a decedent's estate (e.g., charitable contribution deduction). In general, a QRT is any trust, or portion of a trust, that was treated as owned by the decedent under Code Sec. 676 by reason of powers held by the decedent or exercisable by the decedent with the consent or approval of a nonadverse party (Code Sec. 645 and Reg. §1.645-1). In the case of a QRT, a new TIN must be obtained following the death of the decedent, regardless of whether there is an executor for a related estate or whether the Code Sec. 645 election will be made. The trustee must furnish the TIN to the payors of the trust (Reg. §1.645-1(d) and Reg. §301.6109-1(a)(3)).
Upon the termination of the election period (see Reg. §1.645-1(f) and Reg. §1.645-1(g)), the combined electing trust and related estate (or the electing trust if there is no executor), are deemed to distribute all of the assets and liabilities of the share that makes up the electing trust to a new trust. If there is no executor and the trust is to continue after the termination of the electing period, the former electing trust must obtain a new TIN. If there is an executor, the trustee must consult the instructions to Form 1040 to determine if a new TIN is required. If a new TIN is not required, the trustee must file Form 1041 using the TIN obtained by the trustee for the QRT following the death of the decedent (Reg. §1.645-1(h)(3) and Reg. §301.6109-1(a)(4)). See ¶24,357 et seq. for further information regarding QRTs and the election under Code Sec. 645.
Identifying Numbers: Use of Identification Numbers: Seller-provided financing
Taxpayers claiming a deduction for qualified residence interest under Code Sec. 163 on any seller-provided financing must include on their return the name, address, and TIN of the person to whom such interest is paid or accrued. Similarly, any person receiving or accruing such interest must report on his or her return the name, address, and TIN of the person liable for such interest. The term "seller-provided financing" means any indebtedness incurred in acquiring any residence if the person to whom such indebtedness is owed is the person from whom the residence was acquired (Code Sec. 6109(h)).
Failure to meet the requirements for information reporting described above is subject to information reporting penalties under Code Sec. 6723. Generally, these penalties are $50 for each failure.
Identifying Numbers: Use of Identification Numbers: Joint return and payment of estimated tax
A husband and wife who file a joint income tax return or pay estimated tax must include both of their Social Security numbers on such return or payment (Instructions to Form 1040 (for 2001 returns), p. 19).
Identifying Numbers: Use of Identification Numbers: Requesting identifying numbers
A person who is required to file a return, statement or other document on which the taxpayer identifying number of another person is required to be shown must request such other person to furnish his taxpayer identification number (Code Sec. 6109(a)(3); Reg. §301.6109-1(c)). This would include, for example, a person who is required to file an information return to report income paid to an individual, real estate transactions or mortgage interest paid. Additionally, an eligible educational institution, or a lender of a student loan must obtain the student's or borrower's TIN. The taxpayer identification number of any foreign person furnishing a withholding certificate referred to in Reg. §301.6109-1(b)(2)(vi) must be provided if it is known to the person making the return or statement. A foreign payee must furnish the appropriate Form W-8 (rather than Form W-9, discussed below) to furnish a taxpayer identification number to a payor (Reg. §301.6109-1(c)).
The request for a TIN should state that the identifying number is required to be furnished under the authority of law. Form W-9, Request for Taxpayer Identification Number and Certification, or Form W-9S, Request for Student's or Borrower's Social Security Number and Certification, should be used to make the request. Payors and educational and lending institutions may establish a system to electronically receive Forms W-9 and W-9S (Announcement 98-27, at ¶36,965.24). The rules for electronic submission of Form W-9 are found in the Instructions for the Requester of Form W-9 (Rev. October 2004). The rules for electronic submission of Form W-9S are found in the 2005 Instructions for Forms 1098-E and 1098-T. A payor with an electronic system can electronically receive a Form W-9 from an investment adviser or introducing broker authorized to submit Form W-9, provided the electronic system meets these requirements (Announcement 2001-19, at ¶36,965.24).
If the other person fails to respond to the request for his identifying number, the person required to file the return, statement or other document must sign an affidavit on the transmittal document forwarding the return, statement or other document to the Internal Revenue Service stating that he has complied with the request requirement of Reg. §301.6109-1(c), but does not know the identifying number of the other person.
Returns that are not information returns. A return or supporting statement showing the income tax liability of an individual and also information regarding another person is not considered to be a return, statement or other document for the other person (Code Sec. 6109(b)(1)).
Example:
John Smith files an income tax return for the calendar year in which he claims medical expense deductions. A supporting statement shows the names and addresses of doctors to whom payments were made during the year. John Smith does not have to request or include the doctors' Social Security numbers in his income tax return or supporting statement.
An estate or trust, however, must include in its return or supporting statements the Social Security number of each beneficiary (Code Sec. 6109(b)(2)).
Identifying Numbers: Use of Identification Numbers: Use of employer identification numbers by sole proprietors and fiduciaries
An individual who is engaged in a trade or business as a sole proprietor uses both his Social Security Number (SSN) and the Employer Identification Number (EIN) of his business when supplying a TIN on returns, statements or other documents, depending on which number is required by the IRS (Reg. §301.6109-1(a)(1)(ii)(D)). For instance, a sole proprietor must include his SSN on Form 1040 and each accompanying schedule; however, the taxpayer's EIN must also be supplied on Schedule C or F if he has a Keogh plan or is required to file an employment, excise, or fiduciary return, or an alcohol, tobacco, and firearms tax return. A sole proprietor's EIN must also be used on Form W-2, Form 720, Excise Tax Return, and when filing information returns, such as Forms 1099. See also IRS Pub. 583, Starting a Business and Keeping Records (Rev. January 2007).
In many instances, individuals receive income on account of which a return, statement, or other information reporting document must be filed by the payor. According to the 2005 General Instructions for Forms 1098, 1099, 5498, and W-2G, all individual recipients (including sole proprietors) should furnish the individual's SSN, rather than an EIN, to the payor. In the case of a sole proprietorship, the IRS prefers that a SSN be provided.
Every estate, including a bankruptcy estate of an individual, or trust must have an EIN, which is used on Form 1041, U.S. Fiduciary Income Tax Return, and should be furnished to payors when necessary for their filing of information returns. Generally, a fiduciary for another person must include the identifying number of such other person, but not the fiduciary's number, on a return, statement or other document filed for the other person. An attorney or other individual functioning in a fiduciary capacity is not required to provide his or her taxpayer identification number on Form 1041. However, a financial institution that submitted estimated tax payments for trusts for which it is the trustee must enter its EIN on the space provided for the EIN of the fiduciary on Form 1041. A financial institution is one that maintains a Treasury Tax and Loan Account (2002 Instructions to Form 1041).
Example:
E, the estate of a decedent, paid $700 during the year for the rental of a warehouse. The employer identification number of the estate must be included on Forms 1096 and 1099-MISC required to be filed for such payment. The person acting as executor, however, does not include his own Social Security number on such forms.
Identifying Numbers: Use of Identification Numbers: Use of identifying numbers, changes in business entities
As a general rule, an entity with an employer identification number (EIN) that changes its entity classification under Reg. §301.7701-3 will retain its EIN (Reg. §301.6109-1(h)(1)). Under Reg. §301.7701-3 an entity may be able to elect to change its classification (Reg. §301.7701-3(g)). An entity's classification may also change based on other circumstances. See ¶43,084 for information on the classification of entities.
Identifying Numbers: Use of Identification Numbers: Access to EINs by Secretary of Agriculture
The Secretary of Agriculture may have access to employer identification numbers for purposes of the Food Stamp Act of 1977 (renamed the Food and Nutrition Act of 2008, effective October 1, 2008, by the Food, Conservation, and Energy Act of 2008 (P.L. 110-246)) (Code Sec. 6109(f), as amended by P.L. 110-246). In administering Section 9 of the Act (7 U.S.C. 2018), involving the determination of applicant qualifications, the Secretary of Agriculture may require each applicant retail store or wholesale food concern to furnish its EIN. The Secretary of Agriculture may share the information if it determines that the information would assist in verifying the matching information against information maintained by the other agency or instrumentality. The other agency or instrumentality may use the shared information only for the purpose of the effective administration of the Act or for the purpose of investigating violations of other federal laws or enforcement of such laws.
Identifying Numbers: Use of Identification Numbers: Tax return preparers
A tax return preparer (as defined in Code Sec. 7701(a)(36) and Reg. § 301.7701-15; see ¶ 43,114.01) who is required by Reg. § 1.6695-1(b) to sign a return or claim for refund must provide his or her identifying number on the return or refund claim. Additional identifying numbers may be required where there is a partnership or employment relationship between two or more preparers (Code Sec. 6109(a)(4); Reg. § 1.6109-2). An individual return preparer can elect to use an alternative to the social security number as an identifying number (Code Sec. 6109(a) and Reg. § 1.6109-2(a)). Specifically, paid tax return preparers can use alternative identification numbers for returns prepared by filing Form W-7P, Application for Preparer Tax Identification Number (see IRS News Release IR-1999-72, at ¶ 36,965.42).
A tax return preparer is required to enter on each return or claim for refund that he prepares the street address, city, state, and postal ZIP code of his place of business where the preparation of the return or claim for refund was completed. Reg. § 1.6109-2A(b)(2) authorizes a preparer to satisfy this requirement by merely entering the postal ZIP code of such place of business, but only if the preparer first advises each affected Internal Revenue Service Center, in writing, that he intends to follow this practice. However, if the place of business is not maintained on a year-round basis, the preparer must enter on the return or claim for refund the street address, city, state, and postal ZIP code of the preparer's principal office or business location that is maintained on a year-round basis, or, if none, the preparer's residence.
Identifying Numbers: Penalties: Penalties
The penalties for failure to supply taxpayer identification numbers are contained in Code Secs. 6721 through 6724 (Reg. § 301.6109-1(f)). These penalties cover the failure to file correct information returns under Code Sec. 6721, the failure to furnish correct payee statements under Code Sec. 6722 and the failure to comply with other information reporting requirements under Code Sec. 6723. The penalties may be waived if it is shown that the failure to comply is due to reasonable cause and not to willful neglect (Code Sec. 6724).
For a discussion of the penalties that apply to information returns and payee statements, see ¶ 40,220 et seq., ¶ 40,240 et seq., ¶ 40,265 et seq., and ¶ 40,285 et seq.
Identifying Numbers: Penalties: Misuse of Social Security number
The penalty provisions of the Social Security Act apply to the misuse of Social Security account numbers for any purpose. It is a felony to willfully, knowingly, and with intent to deceive use a Social Security account number that was assigned on the basis of false information, or to falsely represent, with intent to deceive, a number to be an assigned Social Security account number (or another's assigned Social Security account number). Also, any person disclosing, using or compelling the disclosure of a Social Security account number in violation of federal law is guilty of a felony. If convicted, a maximum fine of $5,000 or imprisonment for not more than five years, or both, may be imposed (42 U.S.C. §408).
Identifying Numbers: Proposed regulations: tax return preparers
Proposed regulations have been issued regarding amendments to the tax return preparer penalties under Code Secs. 6694 (¶ 39,956A) and 6695 (¶ 39,970), and related provisions under Code Secs. 6060 (¶ 36,562), 6107 (¶ 36,922), 6109, 6696 (¶ 39,980), and 7701(a)(36)(¶ 43,114), made by the Small Business and Work Opportunity Act of 2007 (P.L. 110-28). Changes made pursuant to P.L. 110-28 include the broadening of the scope of the tax return preparer penalties to include preparers of returns other than income tax returns, such as employment tax returns and excise tax returns. The Treasury Department and the IRS believe that a comprehensive review and overhaul of all the tax return preparer penalties and related regulatory provisions is necessary in light of the recent amendments to the tax return preparer penalty provisions. The proposed regulations constitute the first significant step in this process.
The Treasury Department and the IRS intend to finalize the proposed regulations by the end of 2008. It is expected that the final regulations will apply to returns and claims for refunds filed and advice given after the date the final regulations are published in the Federal Register, but in no event sooner than December 31, 2008. A public hearing has been scheduled for August 18, 2008. Written or electronic comments must be received by August 16, 2008. Outlines of topics to be discussed at the public hearing must be received by August 4, 2008 (NPRM REG-129243-07). See ¶ 49,807. See, also, the discussion of Code Sec. 6695, beginning at ¶ 39,970, and the definition of a tax return preparer under Code Sec. 7701, beginning at ¶ 43,114, for more information. --CCH.