Does the IRA need an EIN number?

Question

When my LLC issues a K-1 to its investor, who's tax ID number is entered for the recipient? The investors SSN? The investment funds came from a self-directed IRA so the partner is not a person, but an IRA account. Yet the funds belong to the person of the account. Does the account need an EIN?

Carl Fischer · Answer

@Kathy Henley

It is safest to get your Ira a TIN. See IRS publication form and instructions for 990T. If you use your own SS number then it’s not tax deferred/free. Unlike @Brian Eastman we have had irs name matching issues.  Your name, your SS#, your tax in irs eyes-sure you can most likely square it away with a meeting and review or letter but why go thru the hassle?

In addition, if you use the custodian EIN some cities and utilities get tied to the number and the sale of your real estate may have issues to pay off another persons IRA debt as a result of searching the custodians EIN. This has become more prevalent in the last few years opposed to a decade ago. This occurs in the bigger cities primarily but is becoming more prevalent each day.

You can get the Ira TIN for free and or have your cpa obtain it, or pay someone to get it. An Ira Tin has many benefits if you need more info pm me.

Kathy Henley · Answer

@Brian Eastman My LLC has not earned a profit, the rehab is still underway. Therefore, no W-9 with be forthcoming. There may eventually be UBIT, if the historical tax credits are deemed to qualify and the project has expenses reimbursed. For this year, without a profit, could the tax reporting be of the SSN of the investor (like your example) and in the next tax year, change to an EIN number?

How wonderful to have knowledgeable people on BP!

Eamonn McElroy · Answer

@Brian Eastman

"By being sure to use the "IRA" designation, the IRS connects the dots."

Respectfully, counting on the IRS to "connect the dots" is a losing wager in my experience.

Lance Lvovsky · Answer

@Kathy Henley

Yes you should issue to EIN for the IRA. Also make sure you check the box that the partner is a retirement plan.

Grace B. · Answer

Drop a note. I read thru these above replied and I want to acknowledge of Charlies at CamaPlan Self-Directed IRA https://www.camaplan.com  who helped me to apply for an IRA EIN on IRS.GOV.  I forever grateful for his advice. I recommend his company's servicehttps://sa.www4.irs.gov/modiein/individual/index.jsp

To apply for an IRA EIN, not the regular business employer EIN,  this is how I did it.You choose 'other' at the end of the next page, continue, in the next page, you choose 'IRA' on the right panel. Then continue to fill out the forms, You choose 990-T and IRA in the next page, then continue, when you submit, you will get an on-line EIN link which is your IRA EIN.

Disclaimer: Read the content along the pages. Each person is different.

Alan Johnson · Answer

@Kathy Henley This is definitely something that should be discussed with the IRA custodian and the account holder's CPA.  Some of the answers in this thread seem to be addressing the K-1 aspect, and some seem to be addressing the potential UBIT aspect.

While convenient in terms of getting quick responses, the pitfall in seeking answers to regulatory issues (such as taxes) in a social networking platform such as BP is that the respondents tend to answer the question as worded.  So if there is a misunderstanding of the wording, you could receive a response that is inappropriate to your situation.

Inappropriate advice could cost you time and money later in order to straighten things out.

Basit Siddiqi · Answer

@Kathy HenleyYou should request the W-9 to be completed before/during the phase of accepting them as an investor.

Brian Eastman · Answer

While a more distinct connection between the IRA and its own EIN may be preferable, it is not always possible, or may not exist in time for required reporting.

I working with thousands of clients over a dozen years we have never had an IRS matching issue where the taxpayer on the document such as a K-1 or 1099 is listed as "John Q. Public IRA" and the account holder's SSN is used.   By being sure to use the "IRA" designation, the IRS connects the dots.

Eamonn McElroy · Answer

@Kathy Henley

You should not use the SSN of the investor for an IRA K-1.  Doing so may cause a matching notice from the IRS if the K-1 subsequently isn't included on the individual's 1040.

The IRA K-1 should use either the custodian's EIN or obtain an EIN as Lance suggested.

Brian Eastman · Answer

@Kathy Henley

You should be getting a W-9 from any investor before taking them on.

With an IRA, tax reporting can be done a few ways.  The simplest is "John Q. Public IRA, with John's SSN".

In some cases, an EIN may be obtained for the IRA, depending on account structure and whether there may be foreknowledge of IRA based taxes such as UBTI or UDFI.

Alternately, the EIN of the IRA account custodian may be used.

Have your investor check with their IRA provider and then send you an appropriate W-9.

Does the IRA need an EIN number?

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