Form SS-4 Tip

[David MacLennan]

I often apply for EIN's for clients using the internet so I can immediately receive the EIN. Recently I've had lots of problems where the applications seem to be rejected for no apparent reason, even though I was carefully following all the Form SS-4 instructions.

Usually what happens is they will fax a response saying something is wrong with the application and ask for a response within a week or so. They list about 10 things that could be wrong, but never circle one of the items or otherwise identify the problem. When I fax a response asking what is wrong with the application, I receive no reply. I have some indication that for these EIN's that receive such faxes, the IRS is nullifying the EIN's, but I have not taken the time to verify this for all EIN's.

Well, I just got a call from an IRS employee asking "Is this an application for a sole proprietor or for a plan?" I was a bit floored, but quite pleased, that they had called me. After a bit of difficulty communicating the difference between the plan trust EIN and the EIN for a sole proprietorship (needed for Form 5500), she told me that whenever you apply for a sole proprietorship EIN, NEVER check the box "created a pension plan" under item 9 "reason for applying." If you do, they assume you are confused and don't actually want a EIN for the sole prop, but rather want one for the plan trust. She said that such applications are usually rejected and the EIN's issued over the internet are nullified.

Checking "created pension plan" under item 9 seems perfectly logical for a sole prop, since you need the sole prop's EIN to file Form 5500. Perhaps others have done the same thing, hence I am posting this info. After more confusion over the purpose of the sole prop EIN and the trust EIN, she agreed with my suggestion to check "other" under Item 9 and enter "required for Form 5500" when applying for a EIN for a sole proprietorship.

As to the perplexing faxes I mentioned in the first paragraph, she said that one of the IRS offices (NY I believe, there apparently are 3 that handle EIN's), does that kind of thing. My experience is that in that case you really need to make a conference call with your client (client is needed on the line unless you have Form 2848), call the general IRS number, wade through the various voicemail options to get to business "entity control", and then try to find out if the EIN was issued, etc.

And also remember that when you need a plan trust EIN, don't check the box "trust" for type of entity under item 8a. As per the instructions, check "other" under item 8a and write "created pension plan", then under item 9 check the box "created a pension plan". IMO, The IRS should really clean up this form, or the instructions, or how they are processing the applications, to make it more logical. The amount of time you can spend on this can be very depressing.