Under the law, taxpayers with more than $50,000 of Federal employment tax deposits in 1995 are required to enroll in the electronic Federal Tax Payment Systems (EFTPS) and to deposit electronically beginning July 1, 1997.

Identity Crisis? Potential Confusion About Names When A Business Enrolls In EFTPS

Every employer subject to Federal employment taxes must have an employer identification number (EIN). An employer uses its EIN, which is assigned by the IRS, when filing tax returns and making deposits, preparing information statements and corresponding with the IRS and Social Security Administration.

Thus, an employer should have and use only one EIN, regardless of how many facilities or establishments it has and whether it conducts operations under more than one business or trade name. However, each corporation that belongs to an affiliated group must be treated separately, with its own unique EIN.

The IRS Baseline For Business Name Originates In Form SS-4

Form SS-4 (Application for Employer Identification Number) requires the applicant to give "legal name" on Line 1 and on the next line to give "trade name of business," if different from legal name. The instructions to Form SS-4 explain that the "legal name" of the entity applying for the EIN is the name of the charter or the other legal document establishing the business entity. More specifically:

• Individuals: enter the first name, middle initial and last name. If a sole proprietor, enter individual name, not business name. Do not use abbreviations or nicknames.

• Partnerships: enter the legal name of the partnership as it appears in the partnership agreement. Do not list names of the partners.

• Cooperation: enter the corporate name as it appears in the corporation charter or other legal document creating it.

Line 2 Form SS-4 is intended for the "trade name" of the business, if different from the legal name. The trade name is the "doing business as" name, says the IRS.

Importantly, the instructions then state:

"Use the full legal name on line 1 on all tax returns filed for entity. However, if you enter a trade name on line 2 and choose to use the trade name instead of the legal name, enter the trade name on all returns you file. To prevent processing delays and errors you file. To prevent processing delays and errors, always use either the legal name only or the trade name only on all your returns."

These technical distinctions have become important in the past year or so for business entities seeking to enroll in the Electronic Federal Tax Payment System (EFTPS), use of which is now mandated for many employers. IRS Form 9779 is to be used by businesses enrolling directly, and similar information is required if the business is an ADP Tax Filing Service client.

Line 3 of Form 9779 asks for "business taxpayer name." Some applicants have provided their trade name. Importantly, however, the IRS wants the legal name on file from the form SS-4 filed by that business entity to obtain their EIN. Unfortunately, when the name and EIN in the form 9779 application are not a valid match with the IRS Form SS-4 data-base, the enrollment application will be rejected and the applicant must correct and resubmit the enrollment application. The re-submission process could take 6 to 10 weeks for a confirmation or another rejection.

In summary, entities seeking enrollment in EFTPS must supply on Form 9779 their legal name, not their trade name, even though instructions to that form appear to allow either. Also, the only valid characters are "A-Z, 0-9, -, &," and blank.