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Legal Alert: The IRS has taken the "Disregarded" out of "Disregarded Entity" for Employment Tax Purposes

02/16/2009

Single member limited liability companies and qualified subchapter S subsidiaries ("Q-Subs") are generally treated as "disregarded entities" for federal tax purposes. Effective on and after January 1, 2009, an owner of a disregarded entity is required to obtain an Employer Identification Number (EIN) for the entity and pay and report Federal employment taxes and wage payments under the entity's name and EIN. Prior to January 1, 2009, disregarded entities were permitted to pay and report employment taxes and wage payments using either the entity's name and EIN or the owner's name and EIN. This means that if you currently operate through a disregarded entity which does not have its own EIN, you must apply for one and report Federal employment taxes and wage payments under the entity's name and EIN.

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