IRAs and EINs
We have a client who is insisting that they can use the EIN of a partnership to open a traditional IRA for themselves.
I do not see how this is possible as our documents fall under 5305-A which clearly states that “the depositor is the [b]person[/b] who establishes the custodial account.” However, under [i]Identifying Number[/i], the instructions state:
“The depositor’s social security number will serve as the identification number of his or her IRA. An employer identification number (EIN) is required only for an IRA for which a return is filed to report unrelated business taxableincome. An EIN is required for a common fund created for IRAs.”
I interpret this to mean that in addition to a SS number, you may have to provide an EIN for certain investments…is this correct? If I’m wrong, and the client can establish a traditional IRA for a partnership, how would the tax reporting be handled?
Permalink Submitted by Alan Spross on Thu, 2008-07-03 17:16
I concur. The client must provide their own SSN here. The EIN probably comes into play when the IRA must file a 990 to pay the UBTI tax when investments in the IRA generate over $1,000 of such income. I am not aware that the IRA custodian requires an EIN when the account owner chooses UBTI generating investments for the account.
Of course, an estate EIN must be provided when the IRA death benefits are paid to an estate beneficiary, but that’s a different issue.
Permalink Submitted by Denise Appleby on Thu, 2008-07-03 17:57
[quote=”alan-oniras”]…The EIN probably comes into play when the IRA must file a 990 to pay the UBTI tax when investments in the IRA generate over $1,000 of such income. I am not aware that the IRA custodian requires an EIN when the account owner chooses UBTI generating investments for the account. [/quote]
You are right. When the IRA custodian receives notification from the issuer that the IRA will be subject to UB I, the IRA custodian files IRS Form SS4 on behalf of the IRA to obtain an EIN for the IRA, if the IRA does not already have one. The EIN is used to report the UBIT