Received an IRS denial notice for your EIN application? Don’t panic! This article thoroughly analyzes the top 5 reasons non-U.S. residents face EIN application denials, including SS-4 form errors, information inconsistencies, and identity verification issues. It provides detailed solutions, prevention strategies, and guidance on how to appeal, ensuring your EIN application ultimately succeeds.
After applying for an EIN for your U.S. company, if you receive no confirmation from the IRS—or worse, a denial notice—it can be incredibly frustrating and cause significant business delays. For non-U.S. residents, the risk of denial is relatively higher due to limited communication channels, special document requirements, and unfamiliarity with IRS procedures.
However, remember: An EIN application denial is not the end—it’s a solvable problem. In most cases, the denial stems from correctable administrative or informational errors. This article will detail the five most common reasons non-residents face EIN denials and provide practical solutions and prevention strategies to turn “denial” into “approval.”
1. Reason for Denial: Errors on the SS-4 Form (Most Common)
The IRS processes a massive volume of applications, and any error can lead to the application being flagged or rejected.
- Specific Issues:
- Leaving the SSN/ITIN Field Blank: Non-residents must clearly write “Foreign” in Item 7b of Form SS-4. Leaving it blank is the most frequent cause of denial.
- Inconsistent Company Name: The company name on the SS-4 does not exactly match the legal name on the state-issued Articles of Organization (e.g., an extra “The” or missing “Inc.”).
- Incorrect Formation Date or State: The date or state of formation does not match official records, or the state abbreviation is incorrect (e.g., “DE” instead of “Delaware”).
- Vague Business Description: Using terms like “Other” or overly general descriptions in the “Principal Business Activity” field.
- Solutions:
- Double-Check Original Documents: Carefully compare the SS-4 form with your company’s formation certificate, ensuring the name, date, and state match exactly.
- Correct and Resubmit: Based on any IRS feedback (if provided), correct the errors and resubmit the complete SS-4 via fax or mail, clearly marking the envelope or cover sheet as “Resubmission – Corrected”.
- Seek Professional Review: Before resubmitting, have an accountant or professional service (like SpeedEIN) review the form for accuracy.
- Prevention Strategy: Use a checklist to verify all information before submission, especially the legal company name and responsible party details.
2. Reason for Denial: Inconsistency Between Company Information and State Records
The IRS cross-references the company information you submit with public records from the Secretary of State. Any discrepancy can trigger a rejection.
- Specific Issues:
- Abnormal Company Status: The company is registered but has failed to file its Annual Report or pay Franchise Tax, resulting in a status of “Not in Good Standing”.
- Unupdated Information: The company changed its registered agent or address after formation but failed to update it with the state government, causing a mismatch with the information you provided.
- Solutions:
- Verify Company Status: Immediately check your company’s current status on the Secretary of State’s official website. If the status is not good standing, file the missing reports and pay any penalties to restore “Good Standing”.
- Update Company Information: If information has changed, update it in the state system first, then resubmit the EIN application.
- Provide Proof: Include a “Certificate of Good Standing” issued by the Secretary of State with your resubmission to prove compliance.
- Prevention Strategy: Ensure your company always remains in “Good Standing” and promptly update any changes.
3. Reason for Denial: Failed Identity Verification or Missing Information for the Responsible Party
For non-residents, the IRS may struggle to verify your identity and authority.
- Specific Issues:
- Incomplete Responsible Party Info: Missing the full name, nationality, or complete address of the responsible party.
- Lack of Supporting ID: Although “Foreign” is written on the form, no supporting documents (e.g., passport copy) are provided to verify the responsible party’s identity, especially in mail applications.
- Questionable Authority: For multi-member LLCs or corporations, failure to clearly demonstrate that the applicant (responsible party) has legal authority over the company’s finances.
- Solutions:
- Include ID Proof: Add a notarized copy of the responsible party’s passport to your resubmission package.
- Clarify Authority: Attach relevant pages from the Operating Agreement or Bylaws showing the responsible party is a manager or owner with authority to act on behalf of the company.
- Apply Through a Representative: Use a U.S.-based authorized representative; their presence adds credibility.
- Prevention Strategy: Treat a notarized passport copy as a standard part of your application package.
4. Reason for Denial: Incorrect Application Method or Submission Channel
Using an inappropriate method for non-residents can cause the application to fail.
- Specific Issues:
- Attempting Online Application: The IRS’s online EIN Assistant is only for U.S. residents with an SSN or ITIN. Non-residents cannot complete it, leading to failure.
- Wrong Mailing Address: Using an incorrect IRS processing center address, resulting in returned or lost mail.
- Failed Phone Application: Non-residents typically do not qualify for phone applications and may be told they cannot proceed.
- Solutions:
- Switch to the Correct Method: Immediately stop using ineffective methods. Opt for fax submission through an authorized representative—the most reliable and fastest route for non-residents.
- Verify the Address: If mailing is necessary, confirm the latest mailing address for non-resident applications on the IRS website.
- Prevention Strategy: Non-residents should default to the “fax via authorized representative” method as the safest option.
5. Reason for Denial: Incomplete or Unclear Application Materials
Materials that are insufficient or illegible fail to meet IRS review standards.
- Specific Issues:
- Fuzzy photocopies where key information is unreadable.
- Failure to include copies of formation documents (not mandatory but helpful for faster processing).
- Overly brief or abbreviated business descriptions.
- Solutions:
- Provide Clear Copies: Ensure all documents, including the SS-4, are high-resolution, legible scans or copies.
- Include Supporting Docs: Proactively attach clear copies of the formation certificate and the responsible party’s passport.
- Describe Business in Detail: Use complete sentences to clearly explain your primary business activity.
Key Steps After a Denial
- Stay Calm and Read Carefully: Carefully review any IRS communication to understand the specific reason for denial.
- Gather All Documents: Collect your original application, company documents, passport, and any IRS correspondence.
- Analyze and Plan: Use this guide to identify the most likely cause and develop a correction plan.
- Resubmit or Appeal: Correct the issues and resubmit. If you believe the IRS made an error, file a written appeal.
- Seek Professional Help: If handling it yourself is difficult, contact a professional EIN service immediately. Their expertise in complex cases can significantly increase your success rate.
Conclusion: Denial is a Step, Success is the Outcome
Receiving an EIN application denial is discouraging, but it should not be the end of your U.S. business venture. The vast majority of denials are due to technical, correctable errors. By accurately diagnosing the issue, applying the right solution, and potentially leveraging professional support, you can overcome the obstacle and successfully obtain your EIN. Remember, persistence and the right strategy are the keys to success.