When a person acts in a representative capacity as a Trustee of another person’s estate or as the court appointed Personal Representative of a Decedent’s probate estate they become a Fiduciary.  A fiduciary needs to obtain an Employer Identification Number (“EIN”) from the Internal Revenue Service (“IRS”).  The EIN is needed by a fiduciary in order to open financial accounts and to sell assets, especially real property, and to file income tax returns in a representative capacity. 

          What is an EIN?  The IRS website says that, “An employer identification number (EIN) is a nine-digit number assigned by the IRS. It’s used to identify the tax accounts of employers and certain others who have no employees. The IRS uses the number to identify taxpayers who are required to file various business tax returns. EINs are used by employers, sole proprietors, corporations, partnerships, non-profit associations, trusts, estates of decedents, government agencies, certain individuals, and other business entities.” EIN’s should not be confused with social security numbers.   

When is an EIN needed?  A fiduciary needs an EIN when the fiduciary steps-in either as a trustee to take control of assets that belong to another person’s trust or as a court appointed personal representative of a decedent’s probate estate. 

          Why is an EIN needed?  Fiduciaries need an EIN in order to report income that the fiduciary receives in their representative capacity and to file “fiduciary tax returns” to report such income and to pay income taxes on behalf of the entity that they represent.  If a fiduciary were to use their own social security number when acting in a representative capacity, and not an EIN, then the IRS would hold the fiduciary liable for the income reported under that social security number even though the income did not belong to the fiduciary personally.

How is an EIN obtained?  Prior to applying for an EIN, the fiduciary signs and dates a completed SS-4 Application for Employer Identification Number.  The SS-4 can be obtained from the IRS online (www.irs.gov/pub/irs-pdf/fss4.pdf).  The SS-4 is typically completed by the fiduciary’s attorney or tax accountant as it requires a technical understanding of income tax law. 

          Once the IRS’s SS-4 form is completed, the EIN is obtained by using an on-line IRS application, or by faxing or mailing the completed SS-4 EIN application to the IRS (www.irs.gov/taxtopics/tc755).  The IRS no longer assigns EIN’s over the phone, except to international applicants.  The IRS does, however, accept calls at its (800) 829-4933 helpline for information regarding EIN’s.

          When the IRS’s online application is used, the IRS provides the EIN immediately upon submission, unless a problem occurs with the application.  It is necessary to proceed slowly through the online process, especially the web page where the EIN application is summarized, prior to submission, and the next page where the EIN is actually assigned, after submission.  These two pages should  be printed.  Neither one is available afterwards.  Later, the IRS will also mail the fiduciary a letter with the assigned EIN and with a “name control” to be used by fiduciary on fiduciary income tax returns. 

          Lastly, the fiduciary provides a copy of the IRS’s EIN letter (or the printout of the EIN assignment page if the IRS online application was filed) to banks, brokerages, insurance companies, title companies (when selling real property) and tax preparers.   Without an EIN the fiduciary cannot do business and cannot file income tax returns.

The foregoing discussion is neither legal nor income tax advice.  Consult a qualified attorney or tax preparer for guidance.

Dennis A. Fordham, attorney, is a State Bar-Certified Specialist in estate planning, probate and trust law. His office is at 870 S. Main St., Lakeport, Calif. He can be reached at Dennis@DennisFordhamLaw.com and 707-263-3235.

“Serving Lake and Mendocino Counties for nineteen years, the Law Office of Dennis Fordham focuses on legacy and estate planning, trust and probate administration, and special needs planning. We are here for you. 870 South Main Street Lakeport, California 95453-4801. Phone: 707-263-3235.”