As we come close to the end of taxable year in conjunction with the forthcoming potential sunset of the Tax Cuts and Jobs Act on January 1, 2026, estate planning attorneys are frantically trying to finalize advanced estate planning transactions such as intentionally defective grantor trusts (IDGT), spousal lifetime access trusts (SLAT), irrevocable life insurance trusts (ILIT), etc., as well as getting the IDGTs, SLATs, and ILITs funded before year end. While for many of these advanced estate planning transactions, the creator of such irrevocable trusts (i.e., the settlor, grantor, trustor, etc.) is treated as the party responsible for paying the income taxes and their SSN technically could be used as the tax identification number—which is commonly known as an Employer Identification Number (EIN)—it generally is not only the best practice to still get a separate and distinct EIN for the irrevocable trusts, but most all financial institutions will require it in order to open up a bank account within the irrevocable trust. However, if the new EIN is not obtained online before a certain date in December, the tax practitioners and their clients may not get the transaction completed before year-end. This is because the Internal Revenue Service (IRS) shuts down online applications for new EINs during perhaps the busiest time of year when for “Annual Maintenance.” Typically this starts around December 20th, where the online portal to obtain EINs does not reopen until the first business day of January. This article provide a general overview for how one obtains an EIN and what to do if there is an estate planning emergency to obtain one before year-end during the online black-out period.
Why You Need an EIN
When establishing an irrevocable trust, one important step is obtaining an EIN from the IRS. An EIN is necessary for tax purposes and helps identify the trust as a separate entity, even if the trust is not separate and distinct from its creator for income tax purposes. The IRS requires irrevocable trusts to have an EIN for several reasons:
Tax Reporting
In general, an irrevocable trust generally is required to file its own tax returns and report income, expenses, and distributions. This is done on an IRS Form 1041 – U.S. Income Tax Return for Estates and Trusts under the current tax law. Even if the irrevocable trust is structured as an “intentionally defective grantor trust,” where the income will be reported on the IRS Form 1040 – U.S. Individual Income Tax Return of the creator of the irrevocable trust, most CPAs, estate planning attorneys, and tax practitioners will still file an IRS Form 1041 for the irrevocable trust, even if the income is ultimately to be reported on the IRS Form 1040. Upon the death of the creator of the irrevocable trust, or upon the defective grantor trust powers being turned off, the irrevocable generally would then be responsible for the payment of income taxes on an IRS Form 1041 and would still be using that same EIN.
Banking
As mentioned above, most financial institutions require an EIN to open a bank account in the name of the irrevocable trust through its trustee.
Asset Management
In general, an EIN helps manage trust assets and simplifies the process of distributing income to beneficiaries.
Steps to Apply for an EIN
The following are the general steps to obtain an EIN, where the specific instructions can be found on the IRS’ website.
Determine Eligibility
As noted on the IRS’ website, the first step on obtaining an EIN is to determine eligibility. The person obtaining the EIN on behalf of the irrevocable trust must already have their own tax identification number (SSN, ITIN, or EIN) that is separate and distinct from the EIN being obtained for the irrevocable trust.
Gather Required Information
Before applying, gather the following details: (a) the name of the trust as it appears in the trust document; (b) the date the trust was established; (c) the name and taxpayer identification number of the grantor (the person who created the trust); (d) the name and taxpayer identification number of the trustee (the person managing the trust); and (e) the address of the trust.
Choose Your Application Method
You can apply for an EIN in several ways: (a) Online: The fastest method is through the IRS website. Use the online EIN application tool available during business hours. This method provides an EIN immediately upon completion; (b) By Mail: Download Form SS-4 from the IRS website, fill it out, and send it to the appropriate address listed in the form instructions (processing time can take four to six weeks); (c) By Fax: You can also fax Form SS-4 to the IRS, where if you provide a return fax number, you will receive your EIN within four business days; or (d) By Phone: International applicants can call the IRS at 267-941-1099 to apply by phone.
Complete Form SS-4
Whether applying online or by mail, you will need to fill out Form SS-4. Be sure to indicate that the trust is irrevocable in the application.
Submit Your Application
If applying online, follow the prompts to submit your application. If using mail or fax, ensure you send it to the correct IRS address or fax number.
Receive Your EIN
Once your application is processed, you will receive your EIN. Keep this number in a safe place, as you will need it for tax filings and financial transactions related to the trust.
Year-End Issues and Solutions for Obtaining EINs
The biggest issue that taxpayers will run into while attempting to obtain an EIN for irrevocable trusts at year-end is the IRS’ system maintenance that prevents obtaining EINs online. If you run into this issue, try not to panic, as there are relatively reasonable solutions to try to still obtain an EIN and hopefully enable you to complete your year-end tax and estate planning transactions.
If you run into the first issue when attempting to utilize the IRS’ website to obtain an EIN, the first option that is recommended is attempting to obtain an EIN via fax. Yes, you read that correctly. While the fax machine is a rather archaic form of technology, where most of us will have to run an internet search to remind ourselves how to use a fax machine and what to put in the cover letter, the IRS still regularly uses this form of technology and tends to prefer it over actually speaking with taxpayers over the phone. As noted above, if you request an EIN via fax, if you provide a return fax number, then you will receive your EIN within four business days. While this is not as immediate as obtaining one online, it is obviously a decent alternative when the online portal is under going system maintenance and unavailable. Furthermore, the response time to obtain an EIN by mail is four weeks and obtaining an EIN by phone is allegedly only permitted for international applicants.
However, if the online EIN portal is down, using a fax machine is not something that is possible and waiting four to six weeks to obtain an EIN by mail is not going to accomplish your goal of completing year-end tax planning, then your last best option is to find a financial institution that might be willing to open a bank account in the name of the irrevocable trust that uses that creator’s SSN; this would only be lawfully permitted from a tax perspective if the trust is in fact a “grantor trust” for income tax purposes, as the income is to be reported to the creator/grantor on their IRS Form 1040 anyway. Once the new separate and distinct EIN for the irrevocable trust is later obtained, such extraordinarily helpful financial institution could then switch the tax identification number from the creator’s/grantor’s SSN to the newly obtained EIN.
Hopefully most taxpayers heeded this Forbes contributor’s advice from earlier this year and did not wait until the last minute to engage in incredibly complex tax and estate planning transactions, so as to not have to deal with the curious case of IRS system maintenance shutdown of the online EIN portal . Nevertheless, if that was not the case, hopefully this article provided viable solutions relating thereto. As a final note, please be advised that since May 21, 2012, the IRS will limit the issuance of EINs to one per responsible party per day.
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