Who is a 'Responsible Party'?

Whoever has the gold makes the rules. The IRS doesn’t have the gold (the Treasury Department does), but it certainly does make rules about how the gold is acquired.

IRS regulations, as of 2013, require anyone assigned an Employee Identification Number (EIN) to give the IRS updated responsible-party information. The IRS subsequently issued follow-up guidance on the way, and how often, responsible-party information must be reported to the Service.

It therefore begs the question: who is a responsible party? As the IRS makes the rules along these lines, let’s let it tell us:

“For entities with shares or interests traded on a public exchange, or which are registered with the Securities and Exchange Commission, “responsible party” is (a) the principal officer, if the business is a corporation, (b) a general partner, if a partnership, (c) the owner of an entity that is disregarded as separate from its owner (disregarded entities owned by a corporation enter the corporation’s name and EIN), or (d) a grantor, owner, or trustor if a trust.

“For all other entities, “responsible party” is the person who has a level of control over, or entitlement to, the funds or assets in the entity that, as a practical matter, enables the individual, directly or indirectly, to control, manage or direct the entity and the disposition of its funds and assets.”

If you are a responsible party, you know who you are. If you read that section above and said, “Hey, that’s me,” but don’t recall fulfilling any responsible-party reporting, you’ll want to get on that.

With respect to EIN-bearing individuals, here’s something that took effect on Jan. 1, 2014: you must complete Form 8822-B (ensuring that boxes 8a through 9b are filled out) to declare any changes in their responsible party reporting to the IRS. You have 60 days from the change to complete form 8822-B and send it to the IRS. If the change occurred before Jan. 1 –and wasn’t previously reported to the IRS – your deadline is March 1, 2014.

There’s an additional set of responsible-party guidelines if you have SEC-registered shares or interests or if these are traded on a public exchange. There are separate reporting requirements if the responsible party is not a U.S. citizen. And there are always additional “in the case of”; “in the following circumstances”; or, “if the individual is” caveats in these inevitably detailed regulations.

So check with the IRS or your accountant and be sure. And periodically review your EIN status.

On the positive side, there’s no penalty if you don’t fill out the form and report as directed. On the downside, if the IRS doesn’t have the right information, you could build up tax deficiencies and penalties without know it’s happening.

That’s the first rule about gold: don’t lose it needlessly. Better to be safe ensuring the IRS has your right information than be sorry that you didn’t know you were tied to the tax penalty tracks as the IRS train came around the curve.

Tagged Accounting, Tax