Tuesday, April 12, 2005

Stephanie Says

I just received a call from Stephanie of the Internal Revenue Service. Last week I filed for an employer identification number for a client for a newly formed LLC. The LLC in question will ultimately be classified as an S corporation. On line 8.a. of the Form SS-4, I had checked the box for the type of entity as "Corporation" with the form number to be filed as "1120S." In the box, "Other (specify)" I had stated "LLC electing corp", but did not check that box.

Stephanie informed me that this was incorrect and that the box "Other (specify)" should have been checked, with the description "single member" in the line provided. While I did not complain (after all, Stephanie corrected the form and the application will be processed in the ordinary course), it seems to me that my initial submission was correct. In the Q&A section of the web EIN application area, it is stated that LLCs "without type of entity" cannot obtain an EIN over the web. My interpretation of this is that one should check the box for the type of taxable entity (i.e., sole proprietorship, partnership, corporation) and put in a further description next to the "Other (specify)" box.

On the same day as the filing of the SS-4 that Stephanie called about, I filed another LLC that will be electing to be an S corporation. I have not yet received a call from the Service about that application. Given the lack of clarity in this area, I may not receive such a call.


I did receive a call from "Jim" about the other filing. He asked but one question: Was the LLC a single-member LLC or a multi-member LLC? This leads me to suspect that the correct way to apply online for an EIN for an LLC that's an S corporation would be to check the box for a corporation filing a Form 1120S and then, in the line next to "Other (specify)" state either single member LLC or multi-member LLC.

1 comment:

Anonymous said...

The SS-4 instructions provide that a single-member LLC that is accepting default classification should check "other" and write "disregarded entity" in the corresponding line.

The web EIN Q&A provides: "If you are an LLC, in order to apply you must provide the following information...Check the type of entity in line 8a (partnership, sole proprietorship, or corporation), and Indicate on the line by Other (do not check other) single or multi member"

Thus, the paper instructions say to check "other" and write diregarded entity, the web instructions say don't check "other" and write single member. The IRS rep I talked to became quite hostile when I pointed this out. The IRS rep my colleague talked to said check other and write "single member disregarded entity."