Changing Your Address or Responsible Party Could Get You in Hot Water with the IRS

Best Practices : Article

IRS_form_8822-B.jpgSpring brings so many good things. Spring training for baseball. Better weather here in Boston. And for me, as a financial expert, the fun of tax time. As our clients approach tax time, I typically get questions like, “What’s new with the IRS?” Because in taxes, even something as simple as changing your address can generate the need for some hefty paperwork.

So that brings me to one thing that’s new. In the past, if a nonprofit with an EIN # moved or changed its address, it would normally just send in the change of address form to the IRS.That isn’t enough anymore. Now, with form 8822-B, the IRS has added the requirement that any non-profit that changes its address or its “Responsible Party” should fill out and submit Form 8822-B.

Let me explain what a “Responsible Party” is. Here’s what the IRS says: It’s 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. The ability to fund the entity or the entitlement to the property of the entity alone, however, without any corresponding authority to control, manage, or direct the entity (such as in the case of a minor child beneficiary), does not cause the individual to be a responsible party.”

Not so clear, is it? There’s some question as to whether the responsible party is the person signing the form, the Executive Director, the organization’s treasurer, or some other individual. This is a matter worth checking with your organization’s financial consultants.

Once you’ve figured that out, the form itself is fairly straightforward, with only 10 items. These include what type of return the organization files, its new address, and information about the new “Responsible Party,” such as that person’s social security number. But this is certainly something to flag for your tax preparer if your organization has had any changes during this past year.

To find out more about the Form 8822-B you can read this article, which was the basis for this post. 

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