F MS Me mbe r F or um: E IN Q&A Mollie Murphy, FMS Lead - - PowerPoint PPT Presentation

F MS Me mbe r F

• r

um: E IN Q&A

Mollie Murphy, FMS Lead Kate Murray, Policy Analyst

We lc ome

E IN Applic ation Issue s

Who ne e ds an E IN?

 Per Revenue Procedure 2013-39, all Home Care

Service Recipient (HCSR) employers, including those served by government agents, must have an EIN

 Prior to serving participants, agents can (but don’t

have to) obtain a separate EIN for purposes of filing and depositing the following federal taxes:

 Federal Income Tax  FICA (Social Security/Medicare)  FUTA

Can we obtain E INs online , or is that still not allowe d?

 Yes, you can!  The IRS made a long-awaited announcement in 2013

stating that EINs could be obtained on behalf of HCSRs online

 NRCPDS developed a procedure that the IRS

approved for how to do this

 We will share this with members after the call

If a par tic ipant has a guar dian or r e pr e se ntative , who should hold the E IN?

 The IRS has recently confirmed that whenever

possible, the HCSR should be the employer

 It’s still allowable for the HCSR’s representative to be

the employer, but not preferred by the IRS

 Mollie would advise that the person acting in the role

as the employer should generally also be the EIN holder

Who c an sign for a par tic ipant?

 A court-appointed guardian

 If a court-appointed guardian signs, attach official

guardianship papers with the SS-4

 Someone with IRS authorization (attained via

executing Form 2848, Power of Attorney and Declaration of Representative

 A parent of a minor child

What if no one is author ize d to sign for a par tic ipant?

 The IRS also accepts an “X” and hand-over-hand

signatures as valid

 An “X” should be witnessed  Witness signatures can generally be done on the same

page

Can minor s hold E INs?

 Yes, the IRS allows minors to hold EINs  If an EIN is obtained on the minor’s behalf, the IRS

requires Form SS-4 to be completed in the minor’s name with the minor’s information, with one exception:

 On the bottom of Form SS-4, the following should be

written in:

 Parent/Guardian of Minor’s SSN: XXX-XX-XXXX

Can the E IN holde r be a paid e mploye e ?

 No—if the person who is directing the services also

provides the services, that makes that person self- employed from the viewpoint of the IRS

 By design, F/EAs are not equipped to handle these

situations

 This scenario also creates a conflict of interest, which

raises red flags for CMS

 For example, CMS says that representatives cannot also be

paid employees

Is it tr ue the IRS will only issue

• ne E

IN pe r r e sponsible par ty pe r day?

 Generally, yes, but the IRS has a special exception in

place for F/EAs obtaining EINs on behalf of HCSRs

 If you apply for EINs over the phone and encounter

difficulties with IRS agents erroneously enforcing the

• ne-EIN-per-day policy, advise the IRS agent that

you have received guidance from IRS HCSR experts and IRS Counsel on this issue and that the limit applies per EIN holder or responsible party rather than per Third Party Designee

 A Third Party Designee is not a responsible party

A pa rtic ipa nt owe s de linque nt ta xe s a nd the IRS won’t issue a n E

• IN. Wha t do I do?

 The IRS is within its authority to refuse issuing EINs

for this reason

 As of February 2015, the participant should pursue

• ther options outside using an F/EA

 Or, the participant should clear up his/her delinquent

tax so the EIN can be obtained

A pa rtic ipa nt ha d a na me c ha ng e tha t isn’t showing up in the IRS syste m ye t a nd now the y won’t issue a n E

• IN. Wha t do I do?

 The IRS will want a letter from the Social Security

Administration as proof of name change

 A copy of a Social Security card will not be considered

sufficient evidence of a name change

 The participant will either need to get a letter of

confirmation from the SSA or complete the paperwork under their old name and then change the name later with the IRS

Can we pay wage s for hour s wor ke d be for e the par tic ipant had an E IN?

 It’s fine to pay for time worked from before you had

the EIN

 The check date will be after you had the EIN

 Taxes are associated with when you pay the

employee, not when the hours were worked

 The key thing is to have the EIN in place at the time

you are cutting the check

How should you handle F

• r

m 941 if you ar e paying e mploye e s on a par tic ipant’s be half but c an’t obtain an E IN for the par tic ipant?

 Two approaches can be used:

 You can file with “applied for” on the Schedule R, OR:  You can use a dummy EIN consisting of eight zeros and a

digit, e.g. 00-000001

 When you get the EIN, use that EIN going forward  If the IRS inquires about wages & taxes associated

with that account, include in your explanation that at

• ne point there was a 941 filed without the real EIN

when the EIN was applied for

 Include that quarter’s taxes & wages in your explanation

Can an undoc ume nte d pe r son obtain an E IN?

 Any person with an SSN or ITIN (Individual

Taxpayer Identification Number, a tax processing number available for certain nonresidents and resident aliens) who meets IRS criteria can obtain an EIN

 Having an ITIN does not give a person immigrant status

 If a person has no SSN and no ITIN, they will not be

eligible to receive an EIN

Par tic ipants with Pr e - E xisting E INs

What happe ns if the par tic ipant alr e ady has an E IN?

 If the participant’s EIN has been closed, you can start

using it again

 If you file Form SS-4, the IRS will give you the old EIN

number and won’t issue a new one

 This SS-4 should be sufficient to “reboot” the participant’s

EIN

 Then, simply file Forms 2678 and 8821 using

participant’s old EIN

 Filing Form 2678 is sufficient to inform the IRS of the

participant’s HCSR status

What if the par tic ipant was not de signate d as “HCSR” whe n the y r e c e ive d an E IN?

 The EIN is still usable as is, even if the participant

received an EIN for purposes other than being an HCSR

 No need to file any special paperwork for such

participants

 Executing Form 2678, which grants the agent

authority to act on behalf of the participant for federal tax purposes, is sufficient to signify HCSR status

What if the par tic ipant was not de signate d as “HCSR” whe n the y r e c e ive d an E IN?

 Even if the EIN is still in use as part of an active

business, using the EIN for HCSR purposes will not cause the agent to take on liability

 The agent will only be liable for wages and taxes that

are reported using a combination of the agent’s EIN and the participant’s EIN

 The IRS knows and expects that EINs will be reused,

and there is nothing wrong with doing so

A par tic ipant got an E IN awhile ago but no longe r knows the numbe r . What do I do?

 The IRS only gives out one EIN per person per

lifetime

 It is acceptable to reuse an EIN, even if it was acquired for

purposes other than being an HCSR

 Have the consumer complete Form SS-4 that lists you

and two other people as the Third Party Designees

 Do not list your organization; it has to be actual people

 They should also complete Form 8821

A par tic ipant got an E IN awhile ago but no longe r knows the numbe r . What do I do? (c ont.)

 Then, apply for an EIN with the SS-4 like you always

would

 If obtaining the EIN online, the online system will tell you

you have to call the IRS

 When you call, they will probably tell you an EIN has

already been issued

 Indicate to the agent that the EIN holder didn't know

the number

 At this point the IRS should give you the old number

Is the r e any way to c he c k whe the r the par tic ipant has an E IN be for e applying for

• ne if the par

tic ipant doe sn’t know?

 No, unless either the original IRS CP 575 letter

(Confirmation of EIN) or 147C letter (Taxpayer Identification Number Verification) is available for reference

 If no letter from the IRS is available, you will need to

apply for an EIN for that participant

A par tic ipant alr e ady has an E IN be ing use d for a se par ate busine ss. What do I do?

 The IRS recently confirmed it will NOT issue a second EIN  Use the sole proprietor’s existing EIN associated with the

agent’s EIN for filing

 The IRS processes HCSR wages and taxes via the combination

• f participant EIN + agent EIN

 The agent will not take on liability for the participant’s

business

 If the participant is using an existing state unemployment

account number, you may have to get an additional unemployment account number or coordinate deposits/filings with the participant

Can the par tic ipant just handle the ir ac tive busine ss and Me dic aid wage s unde r

• ne E

IN?

 Yes—the IRS recently confirmed that this is possible  No need to “set up” the participant as an HCSR if

they already obtained an EIN

 The IRS knows the participant is an HCSR when

Form 2678 is filed and a Section 3504 agent is authorized

 All wages and taxes related to an HCSR are viewed

as a combination of the participant’s EIN and the agent’s EIN

A par tic ipant wants to use the ir E IN for Me dic aid wage s and pr ivate pay. What do I do?

 Mark “some employees” on Form 2678 in this case  File Schedule R for Medicaid wages as usual

(including FUTA) on those wages

 The employer then files and pays taxes (including

FUTA) on their own for private pay wages

 Agent and employer may have to coordinate SUI if

the state requires reporting to be combined

We found out a par tic ipant is e nr

• lle d with two F

/ E As at the same time . What do we do?

 The IRS allows participants to be enrolled as HCSR with

multiple F/EAs at the same time

 Because wages and taxes are processed as a combination

• f the participant’s EIN and the agent’s EIN, being dually

enrolled doesn’t create problems for the IRS

 But this scenario creates problems for State

Unemployment Tax and potentially State Income Tax

 If you encounter a dual enrollment scenario, you should

coordinate with the other agent to determine an approach for SUI and SIT for reporting and depositing per your state’s rules

We found out a par tic ipant is e nr

• lle d with two F

/ E As at the same time . What do we do? (c ont.)

 While the IRS does allow two F/EAs to use the same

EIN simultaneously, this can get tricky for the FICA refunding threshold

 The FICA threshold ($1900 in 2015) is still

determined on an employer/employee basis

 This means that if two F/EAs each serve the same

participant and that participant pays the same employee with each F/EA, the F/EAs must coordinate to determine if combined the employee earned more than the threshold in the calendar year

Othe r E IN Issue s

What is the be st way to r e tir e an E IN?

 Retire an EIN only when the employer has passed

 If an employer disenrolls for any other reason, only revoke

Forms 2678 and 8821 for federal tax purposes

 EIN retirement can be done by closing the business

account with the IRS

 If you have the original CP 575, include that with your

letter to the IRS

 Submit a letter to the IRS at the end of the quarter

after all taxes have been paid and ask that the business account be closed

 Don’t forget about FUTA!

 A sample letter is included on the next page

Sample L e tte r

Dear Sir or Madam, The following employers are deceased as of <Today’s Date>. Please close their business accounts. <List Employer Name> <List EIN for Employer Name> <List as many employer names as needed> <List agent business address> Please contact <Staff Name at number during available hours> with any questions. Sincerely, <Staff Name> <Staff Title>

Sample L e tte r

 Send to:  Internal Revenue Service

Cincinnati, OH 45999

What would be the downside s of not having a se par ate age nt E IN?

 The IRS does not require having a separate EIN to act

as a Section 3504 agent

 The IRS is interested in our feedback on why an

agent might want a separate EIN

Que stions?