IRS Steps Up Reporting Obligation for “Responsible Party” Changes

The IRS recently imposed new requirements to report a change in the identity of an organization’s “responsible party,” including use of the newly revised Form 8822-B.  Before March 1, nonprofits should take a look at their paperwork to determine if they need to make this filing.

As background, every entity (including nonprofit entities) must obtain an employer identification number or EIN from the IRS to be used for tax filing and reporting purposes. This is often one of the first steps an organization takes after formation, generally through the IRS online process (though a paper form SS-4 can be submitted as well). As of January 2010, an organization needs to designate its “responsible party” during that process.  A “responsible party” is  the “person who has a level of control over, or entitlement to, the funds or assets in the entity that, as a practical matter, enables the individual, directly or indirectly, to control, manage, or direct the entity and the disposition of its funds and assets.” In a nonprofit, this will generally be the president (or similar executive).

Prior to 2010, when applying for an EIN a nonprofit organization generally would need to give the name and information of its principal officer. As such, organizations formed before 2010 will not have “responsible party” listed with the IRS and should file  Form 8822-B to report the current individual in that role. Organizations who filed for an EIN in 2010 or after will have a “responsible party” on file, but should check to see if that person needs to be updated—there is a chance that the person listed has changed! If so, the Form 8822-B should be used. The deadline for the filing is March 1. Going forward, entities should report changes to their responsible party within 60 days.

Form 8822-B also can be used to report changes of address, though this aspect of the form is optional—an organization also can change its address through its annual tax or information return.

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