Question: At a recent Advanced New Accounts seminar, the speaker stated that all accounts, with the exception of those specifically exempted under 103.34 (BSA), must have a TIN on file. It was my understanding that nonprofits (such as Billy Bob's Bowling or a neighborhood soccer team) must have a TIN on file. Is this correct? I have been told that asking accounts like these to obtain a TIN is very difficult because it results in additional IRS forms that must be completed by these organizations. Are there any practical solutions to this problem? Apparently, the former compliance officer told the new accounts people to simply write "nonprofit" on the W-9 and not worry about a TIN. Since the BSA requires us to keep a list of those accounts lacking a TIN, can we get by without insisting that these types of organizationss file for one, or will the USA PATRIOT Act likely mandate that we obtain a number in all instances?
Answer: There are two different sources of the requirements for TINs: one is the IRS (for information reporting purposes) and the other is the Bank Secrecy Act. The Bank Secrecy Act regulations set forth certain types of accounts where you are not required to obtain a Taxpayer ID Number for BSA purposes. There is no exception, either under the IRS regs or the Bank Secrecy Act, for accounts for informal organizations, such as Billy Bob's Bowling or a neighborhood soccer team. A TIN is easy for such organizations to apply for and obtain, and the only other type of IRS filings they would need to worry about would be where they placed the funds in an interest-bearing account. If they earn interest, they have to pay taxes on the interest. If they have the funds in a non-interest bearing account, and they don't otherwise generate income, they won't have to file anything.
If you do NOT require them to get a separate TIN:
-- you haven't accurately identified your "customer" for purposes of your bank's records;
-- you can encounter problems if you use an individual's SSN as the TIN and that individual dies;
-- you can encounter problems if you use an individual's SSN as the TIN and that individual is the subject of a levy, garnishment, or court order.
In short, there is no good reason not to require a separate TIN and many reasons you should require one.
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