Proliferation of EIN#s for trusts

[Nashville]

I've seen a lot in the last few years - An individual sets up a trust (mostly revocable) to embrace legal ownership of assets, but retains control of the assets and directs the income accordingly.

For the most part I've been taught that such a "trust" may be legal in the eyes of the state, but is a non-recognized entity by the IRS. Yet, somehow these "trusts" have a Federal ID#. Where did they come from? Who does the SS-4?

I'm finding out that BANKS are insisting on creating these numbers. I believe the banks have a choice between hiring a tax-wise person to determine whether a number is necessary, or simply requiring EVERY such entity to have one. Which of these options do you think the banks will choose?

The result is the issuance of a plethora of unnecessary numbers. There are only nine digits. You would think the IRS would run out of them.

What say ye?

[taxea]

The banks look at a trust as a business entity so in order to put trust money into a bank account the bank requires an EIN. The IRS also considers this an entity

[Snaggletooth]

Is it an Entity?

The IRS also considers this an entity

I don't think it is recognized by the IRS as an entity if the trust is revocable.

Anyone care to add discussion to this?

[TAXNJ]

I don't think it is recognized by the IRS as an entity if the trust is revocable.

Anyone care to add discussion to this?

Briefly, will try:

REVOCABLE TRUST

Person who creates the trust has the right to change it whenever they want without authorization from anyone. Also the person still owns the assets in their estate and has no obligation to give the assets to anyone who may think they will be the beneficiary.

Based on above, generally this would not be considered a “separate” entity and can use their social security number as the TIN.

IRREVOCABLE TRUST

Person who creates the trust has the right to change it but it would be difficult and would need authorization from a court and/or the beneficiary or beneficiaries. In this case, the beneficiary or beneficiaries will have a right to the estate assets.

Based on above, generally this would be considered a “separate” entity and would need a TIN number for the Trust.

[Snaggletooth]

Good Answer

TAXNJ, this is a good plain English answer, and confirms what I have suspected all along. Banks are responsible for the unnecessary proliferation of EIN numbers by insisting on one whether it is needed or not.

[TAXNJ]

TAXNJ, this is a good plain English answer, and confirms what I have suspected all along. Banks are responsible for the unnecessary proliferation of EIN numbers by insisting on one whether it is needed or not.

Thanks. Tried to use good plain English though it is said that “Trusts have existed since Roman times “ when Latin and Greek were the dominate languages.

[TAXNJ]

I've seen a lot in the last few years - An individual sets up a trust (mostly revocable) to embrace legal ownership of assets, but retains control of the assets and directs the income accordingly.

For the most part I've been taught that such a "trust" may be legal in the eyes of the state, but is a non-recognized entity by the IRS. Yet, somehow these "trusts" have a Federal ID#. Where did they come from? Who does the SS-4?

I'm finding out that BANKS are insisting on creating these numbers. I believe the banks have a choice between hiring a tax-wise person to determine whether a number is necessary, or simply requiring EVERY such entity to have one. Which of these options do you think the banks will choose?

The result is the issuance of a plethora of unnecessary numbers. There are only nine digits. You would think the IRS would run out of them.

What say ye?

Agree. Unnecessary potential problems and costs.

Ask the banker to talk to their legal department who hopefully have a Tax Attorney. Otherwise find a different bank.

If an EIN (vs. the person's social security number) is used there is the potential problem that the IRS would send notices asking where are the 1041 forms.

Whereas, if the Revocable Trust is created with the person's social security number, any Revocable Trust income would simply be reported on the 1040 form.

[abctax]

Incorrect

"....The IRS also considers this an entity" - this is not correct.

A revocable trust is not a separated entity in the eyes of the IRS, and does NOT have to file a return.
I agree, that if the bank is insisting on a FEIN, it's time to look for a different bank.

[TAXNJ]

"....The IRS also considers this an entity" - this is not correct.

A revocable trust is not a separated entity in the eyes of the IRS, and does NOT have to file a return.
I agree, that if the bank is insisting on a FEIN, it's time to look for a different bank.

Will you explain when you state "A revocable trust is not a separated entity in the eyes of the IRS, and does NOT have to file a return".

Thanks

[taxea]

TAXNJ, this is a good plain English answer, and confirms what I have suspected all along. Banks are responsible for the unnecessary proliferation of EIN numbers by insisting on one whether it is needed or not.

Both of you are absolutely right. I am working on an A/B trust. The first death then created a family trust with separate assets. The surviving spouse was the Trustee however, even though an EIN was issued at the time, she apparently never used it and never did any tax returns even though her returns show Sch E pg 2 "Income from Trust and the EIN#. When she died in March, because no one knew there was an EIN already issued, a new EIN was requested to open a bank account for proceeds of the sale of the residence, half of which went to the late husband's trust.

Without the original EIN # issued at his death, the IRS would not confirm or deny that an EIN existed for him and due to this would not provide me with any information on whether tax returns were done since his death. I finally found an EIN for him on one of her old tax returns. Sooooo now what to do????

His trustee understands finances, hers doesn't have a clue. When she died all of her records were immediately tossed. It has been a real challenge trying to get documents needed to prepare returns back to 2012 for her and who knows what for him. I can't give this up because the Trustee for her is my sister and the Trustee for him is me.

This is going to become a second career for me.

[Twin Turbo Z]

Both of you are absolutely right. I am working on an A/B trust. The first death then created a family trust with separate assets. The surviving spouse was the Trustee however, even though an EIN was issued at the time, she apparently never used it and never did any tax returns even though her returns show Sch E pg 2 "Income from Trust and the EIN#. When she died in March, because no one knew there was an EIN already issued, a new EIN was requested to open a bank account for proceeds of the sale of the residence, half of which went to the late husband's trust.

Without the original EIN # issued at his death, the IRS would not confirm or deny that an EIN existed for him and due to this would not provide me with any information on whether tax returns were done since his death. I finally found an EIN for him on one of her old tax returns. Sooooo now what to do????

His trustee understands finances, hers doesn't have a clue. When she died all of her records were immediately tossed. It has been a real challenge trying to get documents needed to prepare returns back to 2012 for her and who knows what for him. I can't give this up because the Trustee for her is my sister and the Trustee for him is me.

This is going to become a second career for me.

Billable hours !!!

[taxea]

"....The IRS also considers this an entity" - this is not correct.

A revocable trust is not a separated entity in the eyes of the IRS, and does NOT have to file a return.
I agree, that if the bank is insisting on a FEIN, it's time to look for a different bank.

That's not going to happen. They all require a FEIN, revocable or irrevocable. The IRS only requires a return if and when distributions are made.

[taxea]

Billable hours !!!

True but it would have been so much easier had the second deceased's trustee realize the benefit of all the documents needed for the taxes before they were tossed out. It created a tedious job of trying to get the documents from banks, escrow companies etc.

[TAXNJ]

That's not going to happen. They all require a FEIN, revocable or irrevocable. The IRS only requires a return if and when distributions are made.

Curious when you say "They all require a FEIN, revocable or irrevocable."

Will you identify who "They all" are requiring a FEIN when it applies to a Revocable Trust and what you mean by a FEIN for a Revocable Trust.

thanks

[Burke]

I think she is referring to banks. They don't have a clue as to the differences in tax treatment of trusts.