Unique IRA Account Holder EIN - IRS Requirement
Unique IRA Account Holder EIN - IRS Requirement
If you actively invest in Private Entities using a Custodial Self-Directed IRA account, you need to be aware of an IRS requirement effective beginning with the 2023 Tax Season.
IRS REQUIREMENT
As of the 2023 Tax Season, the IRS requires Partnerships (Form 1065 filed by us as Sponsors) to include both
the Custodian EIN & a unique EIN of the IRA partner ("unique IRA Account Holder EIN") on the K-1 when Unrelated Business Taxable Income ("UBTI") is reported. The Custodian EIN is to be reported on the K-1 on line E (TIN) of the K-1. The unique IRA Account Holder EIN is to be reported on the K-1 on line 20AH (as of the original requirement). Please refer to the following from the IRS:
- FAQ from the IRS
- The IRS made it clear in the 2022 Instructions for Form 1065 that the Custodian EIN and this unique IRA Account Holder EIN are not the same EINs.
- Excerpt from the IRS Instructions in the section labeled "Specific Instructions (Schedule K-1 Only); Part II. Information About the Partner; Items E & F": "...However, if a partner is an IRA, enter the identifying number of the custodian of the IRA. Do not enter the identification number of the person for whom the IRA is maintained. If the partnership reports unrelated business taxable income to such IRA partner, include the IRA partner's unique EIN on line 20, code AH, along with the amount of such income."
- Excerpt from the IRS Instructions in the section labeled "Other Information (code AH)": "...For IRA partners with an amount reported in box 20, code V, include code AH with the IRA partner's unique EIN (not the custodian's EIN)."
- Excerpt from the IRS Instructions in the section labeled "Specific Instructions (Schedule K-1 Only); Part II. Information About the Partner; Items E & F": "...However, if a partner is an IRA, enter the identifying number of the custodian of the IRA. Do not enter the identification number of the person for whom the IRA is maintained. If the partnership reports unrelated business taxable income to such IRA partner, include the IRA partner's unique EIN on line 20, code AH, along with the amount of such income."
- Excerpt from the IRS Instructions in the section labeled "Other Information (code AH)": "...For IRA partners with an amount reported in box 20, code V, include code AH with the IRA partner's unique EIN (not the custodian's EIN)."
INVESTING WITH SPI – Actions Required of You
- If the underlying property for the investment you will participate in with your Self-Directed IRA has debt, UBTI will be reported, and SPI will require you to provide us a unique IRA Account Holder EIN in order to invest.
- If you have not set up your unique IRA Account Holder EIN with the IRS, contact your CPA, Financial Advisor, Attorney, and/or Custodian (Private Entities Department or similar division may be a good start) for instructions on how to create one with the IRS.
- There is an IRS website available to create EINs online. The IRS generates an official form called an SS-4 once the new EIN is created. Depending on how you obtain your EIN, the SS-4 will be provided to you electronically or mailed to you.
- We recommend you provide the IRS FAQ and 1065 instructions information provided in the "IRS Requirement" section on this webpage above to the person you consult with. You may also need to explain that debt was involved in the acquisition of the underlying property.
- Be prepared to provide us the IRS SS-4 document containing your unique IRA Account Holder EIN when you subscribe and to provide both your Custodian’s EIN & your unique IRA Account Holder EIN when filling out SPI forms during the subscription process.
- We ask that you use your SPI Investor Portal to upload the SS-4 to us during the subscription process for security reasons. Email is not secure.
- An EIN is different from a Social Security Number ("SSN"). Providing your SSN to SPI in lieu of the unique IRA Account Holder EIN will not resolve this issue.
- Consult with your CPA, Financial Advisor, Attorney, and/or Custodian to understand all implications and tax impacts, as we do not provide tax advice.
- There is an IRS website available to create EINs online. The IRS generates an official form called an SS-4 once the new EIN is created. Depending on how you obtain your EIN, the SS-4 will be provided to you electronically or mailed to you.
- We recommend you provide the IRS FAQ and 1065 instructions information provided in the "IRS Requirement" section on this webpage above to the person you consult with. You may also need to explain that debt was involved in the acquisition of the underlying property.
- We ask that you use your SPI Investor Portal to upload the SS-4 to us during the subscription process for security reasons. Email is not secure.
If you have any questions regarding this IRS requirement, please contact your CPA, Financial Advisor, Attorney, and/or Custodian (Private Entities Department or similar division may be a good start) for assistance.