IRS Requires Designation of "Responsible Party" by March 31st

IRS Requires Designation of "Responsible Party" by March 31st


Ross Williams

1/27/2014

Dear Church Treasurers and Finance Chairs (copy to Pastors),

The IRS has recently updated their policy with regard to the designation of a "Responsible Party."  As many of you know, any organization with its own bank account and payroll has an "Employer Identification Number."  Sometimes these are referred to as "EIN's" or "Tax Id's."  An EIN works like a Social Security Number for organizations and businesses.

As part of the process of applying for an EIN, the organization named a "Responsible Party," providing his/her social security number.  Typically, the responsible party is the person with the authority to make payments or changes to the financial accounts of the organization.  Until now, once named, an organization had no obligation to update the IRS on changes with respect to the Responsible Party.

On January 1, 2014, this changed.  The IRS has now issued a revised Form 8822-B, "Change of Address or Responsible Party-Business," and is requiring organizations to update their address and responsible party whenever they change.  If an organization has not updated its responsible party since the last change, it is required to do so no later than March 31, 2014.

Fortunately, the process is very simple.  I am including a copy of Form 8822-B and its instructions with this email.  

1. Check the box at the top of the form for "tax-exempt organizations."

2. Check box #1.

3. If your church has changed locations or business addresses, or if you just want to make sure that the correct address is being used, check box #3. 

4. Complete box#4a with the full legal name of your church/organization.

5.  Complete box #4b with your EIN.

6. If you have changed mailing addresses without notifying the IRS, or are unsure what address is on file, complete boxes 5 & 6.   Please use the church address, not the home address of any church leader.

7. My suggestion is to write "unknown" in both box 8a and 9a.  There is little or no value in researching this question.  

8. Completely Box #8b and 9b with the new responsible party and his or her social security number.

9. Have an authorized person sign and list a phone number for the organization. An authorized person may be the current treasurer, church council chair, finance chair or trustee chair.

WHO SHOULD BE THE NEW RESPONSIBLE PARTY? Our General Council on Finance & Administration recommends that the treasurers of local churches serve as the responsible party.  I agree with this recommendation.  While other leaders may share some responsibilities of leadership, the treasurer is typically the best person to receive IRS communications.  Other candidates might be the chair of Finance, the Financial Secretary or a local church Business Administrator.  We do not recommend that pastors serve in this role, especially given our itinerant system.

WILL SERVING AS THE RESPONSIBLE PARTY OPEN A PERSON TO TAX LIABILITIES OR PENALTIES? No.  The responsible party is simply the person designated to receive communications and contact the IRS on behalf of the organization.  Except in instances of fraud directed committed by that individual, the responsible party will not be penalized for acting on behalf of the organization.  Furthermore, most liabilities incurred by officers or other leaders are covered by the local church's insurance policy.

Form 8822-B is a simple form and should not cause a great deal of anxiety.  That said, if you have questions, please do not hesitate to contact me at 914-615-2212.  

Sincerely,  Ross