New IRS Form 8822-B, Change of Address or Responsible Party - Business
The IRS has issued a new tax form, Form 8822-B (click here), for businesses (including churches) to use to keep them informed of the name of the appropriate person to contact when resolving a tax matter. Effective January 1, 2014, a church or district must report a change in its “responsible party” on Form 8822-B to the IRS within 60 days of the change. In addition, any change in “responsible party” made prior to 2014 must be reported on Form 8822-B prior to March 1, 2014.
In general, churches and districts must obtain their own EIN to be used for employer tax reporting and to identify themselves as a tax exempt entity (see exempt status note below). IRS Form SS-4, Application for Employer Identification Number, must be submitted to the IRS to receive an EIN. Currently, the SS-4 contains information about the “responsible party.” However, earlier versions of the SS-4 did not request this information and they have not had a clear process to keep current on “responsible party” information. To remedy this challenge, last year the Treasury Department/IRS issued a new regulation (Treasury Decision (T.D.) 9617) requiring each organization with an EIN to update the name of its responsible party. The consequence of the decision is the new IRS Form 8822-B.
Who Is A “Responsible Party?”
The IRS defines a “responsible party” (see SS-4 instructions) as “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.” In a Wesleyan church or district, they are referring to the treasurer/district treasurer or pastor/district superintendent. Practically speaking, I recommend the treasurer serve as the “responsible party” since they are most apt to be directly involved with tax matters.
What Action Do I Need to Take?
In general, if your church/district applied for its EIN prior to January 1, 2010, Form 8822-B should be filed with the IRS by March 1, 2014 to report the most recent changes. If your church or district filed for a new EIN after January 1, 2010, you must determine if the “responsible party” has changed since the SS-4 was filed. Going forward, organizations must report changes in the “responsible party” within 60 days. The form is not difficult and a sample is available (click here). Currently the form cannot be filed electronically.
Penalties for Noncompliance
The instructions for the Form 8822-B provide the following guidance. If you are an entity with an EIN and your responsible party has changed, use of this form is mandatory. Otherwise, use of this form is voluntary. You will not be subject to penalties for failure to file this form. However, if you fail to provide the IRS with your current mailing address or the identity of your responsible party, you may not receive a notice of deficiency or anotice of demand for tax. Despite the failure to receive such notices, penalties and interest will continue to accrueon any tax deficiencies. In short, every organization with an EIN (including churches) must comply with the newrequirement to update the name of its “responsible party,” but there are no (direct) penalties for not complying.
What If Our Payroll is Outsourced?
Many churches use a payroll service provider (a best practice). This has no affect on the requirement to file Form 8822-B inasmuch as a payroll service provider is a reporting agent, not a responsible party. However, it might be wise to send a copy of Form 8822-B to your payroll service provider.
Does the General Church Need a Copy?
Maybe. Every year the General Church sends a report to the IRS noting additions, deletions and changes of name and address of churches, districts, and other Wesleyan organizations that are registered under the Wesleyan Church group exemption number. Normally the General Church gathers information for the annual IRS Group Exemption Report when churches or the district update the Online District Portal by adding new churches or making changes in a church name and/or address.
At last report, the database of the IRS division that receives this report (Tax-Exempt and Government Entities), did not communicate name and address changes to the other IRS divisions. So, it is possible and not uncommon for payroll tax forms to use the former name of a church and not the new name even though the General Church has notified the IRS of a change. If Form 8822-B is used to update a name or address change (not a “responsible party” change), it would be helpful for a local church and/or district to check and make the same information iscontained in the Online District Portal. Another option is to send a copy of Form 8822-B to the General Secretary’s office by mail, fax, or by email (do not email if the Form contains personal SSN information). Here’s the contact information:
The Wesleyan Church
P.O. Box 50434
Indianapolis, IN 46250-0434