IRS rejecting withholding amounts with "inactive" TIN on terminating plans

[Belgarath]

You have to hand it to those folks at the IRS - they sure know how to take minor things and blow them up into huge problems.

We've had 3 cases in the last couple of weeks where the plan administrator has made distributions, done mandatory withholding, then tried to submit the withholding and had problems. First of all it won't go through electronically since they are using the TIN for the plan. (This is nothing new). Then they file with the 8109 coupon using the TIN. All 3 trustees have then been told that the number is not valid since has not been "active" in the last 3 years.

On one case, the IRS automatically changed the number to the EIN for the business.

On another, the accountant decided to change to the EIN and file under that.

On the third case, the Administrator is looking to us for guidance, do they apply for a new TIN? She told the IRS reviewer that the number is active, they have had it for a long time and it has appeared on the 5500 forms, (Schedule P) - he replied that he didn't know anything about 5500 forms, he doesn't do pension plans.

Has anyone else encountered this? If so, what did you do? This is the first time this has come up for us - appears to be something new. It isn't uncommon for a small plan to go 3 years without a distribution, which apparently makes the TIN "inactive" by the standards of the knuckleheads at the IRS. We can have them apply on-line for a new TIN, but I'm uncertain what other problems this may create. And at the very least, it can cause administrative and recordkeeping nightmares. Sheesh! Any suggestion for somone at the IRS to whom I should forward these concerns, stated a bit more diplomatically... Thanks!

[Bird]

It's a known problem. Are you in ASPPA? ASAP 04-42 had an update.

In brief-

IRS stopped de-activating EINs for "non-use" in Jan 04. Using the EIN on Sch P does nothing to keep it active, although it's been suggested as part of a fix.

In the meantime, to reactivate, you need to communicate with Ogden, UT. Reference the plan name, EIN in question, sponsor mailing address, name and phone # for questions. Fax it to EP Entity Control Unit at 801 620-6900, using sponsor letterhead, or e-mail to Jalynne Archibald at JaLynne.K.Archibald@irs.gov

In a situation where money has already been deposited and you get a reject or correction letter (as in your first case where the IRS changed to the business number - sheesh! - they did that to one of my clients earlier) I think it's too late for reactivating using the procedures above; I'd write back to the address given on the notice with a full explanation. It worked for me. In fact, I don't know how you're supposed to know a number is inactive until it's too late so I don't know that the paragraph above is all that helpful.

[Belgarath]

No, I'm not, but our EA is, so I'll get a copy from him. Thank you very much for this information!!

[Bird]

No problem. I should have mentioned that this started because they were, indeed, systematically deactivating EINs that hadn't been "used" for a certain number of years (e.g. in 1099-R reporting).

[No Name]

I've routinely used the Employer's ID to remit withholding. As long as it's coded as 945 tax, 1099-Rs match up and 945 Form shows Employer's ID, shouldn't be a problem.

You didn't create the problem.