I9-Verification

ETS Best Practices: Ensuring FEIN Match Post-Name or Entity Changes

01.25.2013

Author

Jeff Aleixo

As you finish tying up loose ends in the post-fourth quarter rush, here’s an important housecleaning item that merits some attention.

If your organization has undergone a change of structure (Inc. to LLC, for example) and/or a legal name change, chances are your tax or legal department has appropriately advised the applicable Secretary of State(s) of your change. In fact, many employers do so and consider their entity or name change a “done deal.”

Herein lies the problem, and its a common one: it is incorrect to assume that this notification to the Secretary of State will filter down to the Department of Labor and Department of Revenue.

Given that Secretary of State notification is often done within tax or legal departments, payroll may not even become aware of any oversight until they are contacting one of the state agencies on an unrelated issue.

Failure to notify agencies of changes may lead to:

  • significant extra work for the agencies to make retroactive corrections on your account;
  • various delays;
  • eventually it can lead to extra work for the employer too, having to chase down old documents and file and/or re-file forms;
  • questions at the agency level;
  • information potentially flowing to the wrong accounts;
  • unemployment claims possibly recorded against the wrong account.

While we have not heard of any fines or penalties resulting from this, it’s fair to say you could be setting yourself up for unwanted negative attention from the agency.

Make sure there is a match between your company name, entity type, FEIN, and the agency detail on your employer accounts.

image courtesy of Nemo

There are three categories of change that we typically encounter in our work related to state unemployment insurance and state withholding tax:

1)      Name change only (no change of entity structure/ownership or FEIN)

2)      Entity change (same FEIN, and no change in structure/ownership)

3)      Change of name/entity and new FEIN

For each of these categories, certain generalizations can be made about the type of documentation typically required by the agencies, as follows:

Name change only:

1) Submit name change via a letter or agency form (varies from agency to agency)

2) Also include applicable documentation such as:

a. Copy of Articles of Amendment / Conversion with the State of Incorporation.

b. A printout of the change made with the Secretary of State(s) doing business in (expedites process) if applicable.

Entity change only (no change in FEIN):

Note: Some states require current account to be closed and a new account to be opened

1) Agency status form change (or)

2) New application for agencies requiring a new account.

3) Account closure form required with some agencies.

4) Also include applicable documentation such as:

a. Copy of Articles of Amendment / Conversion with the State of Incorporation.

b. A printout of the change made with the Secretary of State(s) doing business in (expedites process) if applicable.

c. IRS letter (C147) indicating no change to the FEIN. (Send notice to IRS by letter with name change and request the C147 at the same time, or call the IRS to request it if you have already submitted your name change to them. Be sure to include a copy of the Articles of Amendment to the IRS).

Change of name/entity and new FEIN:

1) New application required for most agencies

2) Close existing account if new application required

3) Also include applicable documentation such as:

a. Copy of Articles of Amendment / Conversion with the State of Incorporation.

b. A printout of the change made with the Secretary of State(s) doing business in (expedites process).

Because nothing is simple, you must notify each agency separately:

  • Once for the State Workforce Agency/Department of Labor (for your unemployment tax account/s);
  • and once for the state Department of Revenue (for your income tax withholding accounts).
  • You will have to do this for each state in which you have operations.

Click here to download our eight page state-by-state reference sheet which includes specific details of each state’s requirements. The first four pages apply to state income tax, and the last four pages to state unemployment tax. It should be used as a starting point to which you add your own notes and update as you use it. These details and form numbers/names are subject to change as agencies update their procedures, and all information should be re-verified with the agencies prior to submitting anything to them.

Related Resources:

Small Business Association on Changing Your Business Name 
IRS on Business Name Changes
Links to State Workforce Agencies (scroll down)

Disclaimer: This article is general in nature and is not intended to replace the guidance of an employment tax expert and/or legal professional with regards to an appropriate course of action in your particular circumstances. Please consult with a professional for appropriate advice in your case. Pursuant to IRS “Circular 230” rules, any information included herewithin is not intended or written to be used for the purpose of avoiding penalties under the federal Internal Revenue Code.

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