Plan EIN Application - "responsible for non payroll tax withholding"

[Basically]

I have always checked "yes" for this question because in the case when a terminated participant takes their payout in cash taxes need to be withheld.  The letter the plan receives from the IRS assigning an EIN mentions filing a 945 which has intimidated a new plan sponsor.  I reassured them that since no payouts have occurred resulting in federal withholding, a 945 is not required to be filed.  

I guess I am just looking to be reassured myself that I am doing this correctly... Yes?

Thanks!

 

[Paul I]

You are doing this correctly where the plan is the Payor and responsible for tax withholding from taxable distributions. 

The plan sponsor definitely should want the plan to have its own EIN and have the plan make the tax deposits using that EIN.  I have seen (typically small plan) sponsors who used their EIN as the Payor for a taxable plan distribution.  The IRS could not distinguish some of the nonpayroll tax withholding for plan sponsor from the tax withholding from the plan, and sent a penalty letter for untimely deposits.  It ultimately was resolved, but the it wasted a lot of people's time sorting it out.

You can let the plan sponsor know that the plan having its own EIN does not require filing a 945 in any year where there are no tax withholding to report for that  year.  The language in the 945 filing instructions is clear about this.  If the plan does withhold taxes from a payment, then the plan sponsor is prepared to make the filing.

[Basically]

Thanks for your input Paul.  I have told my clients exactly what you have stated and honestly noone has questioned me.. until this one who didn't like that the letter had a due date for the 945 submission.  I pressed to them that you only need to file the form when taxes are whithheld.  

Thanks again

[Bill Presson]

Don’t let someone that’s never done anything with a retirement plan intimidate you.

[Basically]

On 5/21/2026 at 7:58 PM, Bill Presson said:

Don’t let someone that’s never done anything with a retirement plan intimidate you.

Absolutely!