Change in process to obtain an EIN affects non-residents

IRS news release IR-2019-58 announced a change in procedures for obtaining an Employer Identification Number (EIN )for a US business entity.  This will impact non-residents with US based entities. Beginning May 13, 2019, only individuals with a Social Security Number (SSN) or International Tax Identification Number (ITIN) will be able to request an EIN.  The responsible party for a new EIN must be an individual that has an SSN or ITIN number.

Although they serve many similar purposes, an ITIN number is different from an EIN number.   EIN is issued to a business to facilitate tax reporting for the business.  ITIN is issued to individuals that have US tax reporting obligations, but do not qualify to obtain a SSN.  Generally you must be a US citizen or non-US individual with authorization to live and/or work in the US to obtain a SSN.

This change will impact non-resident owners looking to open a US LLC.  Often non-US individuals will open a US LLC to facilitate selling to US based customers. An EIN also them to open US bank accounts in the name of the LLC.  Previously the individual non-resident was not required to have a US tax ID number in order to obtain an EIN for their LLC.  That will change with this new procedure.  A non-US individual will now be required to obtain an ITIN, prior to obtaining an EIN for their business.

You can read more about the requirements for a responsible party for an EIN at: SS4 Instructions.

The change also prohibits another entity from using its own EIN to obtain an EIN for an affiliated entity.  The responsible party for an EIN must now be an individual and not another entity.

Contact wray@needacpa.com if you have questions about this new US tax requirement.