Any church that has employees, files employment tax returns, or has a bank or brokerage account, must have an "employer identification number" (EIN). This includes nearly every church in the United States. An EIN is obtained by filing a Form SS-4 with the IRS using the IRS website (irs.gov) or by submitting a paper form. Since 2010, line 7 of Form SS-4 has asked for the name and Social Security number of a "responsible party" of the applicant.
The IRS became increasingly frustrated by its inability to communicate with responsible parties identified in employers' SS-4 forms, usually because the responsible parties designated by employers no longer served in those capacities due to any number of reasons, including resignation or death. On November 18, 2013, the IRS adopted an entirely new requirement to address this problem, stating any employer with an EIN must report changes in the identity of its responsible party to the IRS by March 1, 2014, using Form 8822-B.
Many church leaders want to know if this new reporting rule applies to churches. In the upcoming April 2014 issue of Church Finance Today, I go deeper on the rule's application to churches, including how to complete the form, how to respond to this requirement depending on when your church was founded and obtained an EIN, and how to maintain compliance in future years.
However, to help address some immediate concerns, given the looming March 1, 2014, deadline, here are five key items to note:
- The Form 8822-B reporting requirement applies to any organization that has an EIN. This includes most churches.
- The use of the form is mandatory if there is a change in the responsible party identified on the Form SS-4 that a church filed with the IRS to obtain its EIN.
- There are no penalties for noncompliance. However, a church that fails to comply with this reporting requirement, and has a change in the person identified as its responsible party on Form SS-4, may not receive timely notices of deficiencies or demands for taxes from the IRS, which can lead to penalties and additional interest charges.
- Perhaps the most common scenario involves churches that obtained their EIN many years ago, long before Form SS-4 was amended in 2010 to include the identity of a responsible party. Are these churches required to file Form 8822-B? The instructions to the form do not address this common scenario directly, and the IRS has provided no guidance. But it is reasonable to assume that these churches should file Form 8822-B listing the current responsible party's name and Social Security number, and either leaving lines 8a and 9a blank (name and Social Security number of the former responsible party) or inserting on those lines the name and Social Security number of the responsible party who served immediately prior to the current one.
- In most churches, a church treasurer, lead pastor, or member of the church board would satisfy the definition of a responsible party since they have a sufficient level of control that enables them "directly or indirectly, to control, manage, or direct the entity and the disposition of its funds and assets."
Read more about this development in the upcoming April 2014 issue of Church Finance Today.