What Is a Responsible Party?
The IRS defines a responsible party as the individual who ultimately owns or controls the entity or who exercises effective control over the entity.
In most cases, the responsible party must be an individual, not another entity, unless the entity is a government organization.
Examples of a responsible party include:
- Sole proprietor
- Partner in a partnership
- Corporate officer
- Trustee
- Managing member of an LLC
The responsible party listed on the EIN application should match the individual who has authority over the business and its financial decisions.
When Must Clients Update Responsible Party Information?
The taxpayer must report changes to the IRS within 60 days when:
- Responsible party changes
- Responsible party’s mailing address changes
- Business structure changes and affects ownership or control
The IRS uses this information to contact businesses and verify entity ownership.
How To Update Responsible Party Information
Clients should use Form 8822-B, Change of Address or Responsible Party — Business, to report updates.
Filing Instructions
- Mail Form 8822-B to the IRS address listed in the form instructions
- Do not file Form 8822-B electronically
- Keep a copy with the client’s permanent records
If an authorized representative signs the form, attach Form 2848, Power of Attorney and Declaration of Representative.
Common Situations Tax Preparers Should Watch For
Responsible party changes are common after:
- Ownership transfers
- Partnership changes
- Corporate officer changes
- Estate or trust administration updates
- Business reorganizations
- LLC member changes
Tax professionals should confirm responsible party information during annual tax preparation and entity maintenance reviews.
EINs Are Not Canceled or Reassigned
If an organization no longer needs its EIN, the IRS does not cancel or reassign the number. Instead, the organization can request that the IRS close or deactivate the business account associated with the EIN.
Even after a business closes, the EIN remains permanently assigned to that entity.
Why This Matters for Tax Professionals
Outdated responsible party information can:
- Delay IRS notices and correspondence
- Create issues with identity verification
- Affect authorization processing
- Complicate compliance reviews
Reviewing EIN records during client onboarding and annual updates can help reduce administrative problems later.
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Disclaimer: This article is for informational purposes only and not legal or financial advice.
Primary Source
- Internal Revenue Service. “Responsible Parties and Nominees.” IRS.gov. https://www.irs.gov/businesses/small-businesses-self-employed/responsible-parties-and-nominees
- Internal Revenue Service. Form 8822-B, Change of Address or Responsible Party — Business. https://www.irs.gov/pub/irs-pdf/f8822b.pdf
- Internal Revenue Service. Instructions for Form SS-4. https://www.irs.gov/instructions/iss4
- Internal Revenue Service. “Employer Identification Number.” IRS.gov. https://www.irs.gov/businesses/employer-identification-number
