Navigating the filing process for a Special Needs Trusts can feel daunting. One unique requirement to electronically file a return is the Name Control assignment. But what exactly is the Name Control, and why is it crucial to the tax filing process for Special Needs Trusts?
What is a Name Control?
A Name Control is a sequence of up to four characters derived from a taxpayer’s name (the trust’s name in this case). When you apply for an Employer Identification Number (EIN) for the trust, the IRS establishes the name control from the legal name listed on your Form SS-4, Application for Employer Identification Number. This Name Control plays a crucial role in processing your tax return.
Note: When an Employer Identification Number (EIN) is obtained, the IRS issues notice CP 575.B. The name control can be found on the second page of the letter, where it says, “Your name control associated with this EIN is XXXX”. It is also displayed after the date of application on the (IRS Use Only) line on the top of the second page of the notice.
Why is the Name Control Important?
When e-filing, a taxpayer’s provided Employer Identification Number (EIN) and Name Control together must be matched with what is in the IRS e-file database. If they do not align, the e-filed return will be rejected.
Name Control Assignment Rules
The rules for assigning name controls are as follows:
- The name control can have fewer, but no more than four characters.
- Spaces or blanks are not part of a name control. For example, the name control for Joe Doe Trust is JOED.
- Special characters allowed are the ampersand (&) and hyphen (-).
- Blanks may be present only at the end of the name control.
- The word “The” at the beginning of your trust name is not used in your name control. For example, the name control for The Community Special Needs Trust is COMM.
- Do not include “dba” as part of the name control.
It’s also worth mentioning that each case may have nuances and unique circumstances, so when in doubt, it’s recommended to contact the IRS directly or seek professional assistance.
We have provided a few examples in the table below:
John Smith SNT
For individual trust names, the Name Control is derived from the first four characters of the individual’s last name, e.g., “John Smith SNT” becomes “SMIT”.
ABC Corp Special Needs Trust
For corporate trust names, the Name Control is the first up to four characters of the corporation’s name, e.g., “ABC Corp Special Needs Trust” becomes “ABC”.
Endowment for Special Needs Trust
Jo & Molly Special Needs Trust
Special characters allowed are the ampersand (&) and hyphen (-).
Numeric trusts have Name Controls derived from the first four digits of the trust number, e.g., “Trust-1234” becomes “1234”.
The Best Special Needs Trust
If “The” precedes the business name, it is not included in the Name Control, e.g., “The Best Special Needs Trust” becomes “BEST”.
dba Michigan Special Needs Trust
The term “dba” is not included in the Name Control.
Jo Special Needs Trust
For short last names with fewer than four characters, the Name Control is the last name, e.g., “Jo Special Needs Trust” becomes “JO”.
Name Control for Special Needs Trusts
When managing Special Needs Trusts, it’s crucial to understand how name controls are assigned. Special Needs Trusts come in different forms, including trusts established by individuals, corporations, associations, or endowments.
Individual Special Needs Trusts
If an individual sets up a Special Needs Trust, the Name Control will be the first four characters of the individual’s last name. For example, if a trust is established by Johnathon Trustworthy, the Name Control would be TRUS.
Corporate Special Needs Trusts
If a corporation sets up a Special Needs Trust, the Name Control is based on the corporation’s name. For example, if ABC Corp sets up a trust, the Name Control would be ABC.
Association or Endowment Special Needs Trusts
If an association or endowment forms the trust, the Name Control is derived from their name. For example, the Name Control for a trust formed by Endowment for Special Needs would be ENDO.
How to Verify Name Control
IRS recommends verifying your corporation’s name control before e-filing. You can review the rules in the Business Name Control matrix, contact your onsite IRS representative, or call the Business & Specialty Help Line at 1-800-829-4933 for assistance.
Understanding the nuances of Name Control is essential for efficient and effective tax management of Special Needs Trusts. By grasping these requirements, trustees and administrators can mitigate potential issues with IRS correspondence and e-filed return rejections, ensuring a smoother, more streamlined process for their trusts.
At BLISS 1041, we’re committed to simplifying these processes, providing you with the necessary resources and expertise to navigate tax compliance effectively. Reach out to us for any questions or assistance regarding Name Control and other IRS requirements for Special Needs Trusts.
Disclaimer: The information provided in this blog post is for educational purposes only and is not intended to be construed as legal or tax advice. While we strive to provide accurate and up-to-date information, laws and regulations often change, and the application of them can vary widely based on the specific facts and circumstances involved. Therefore, you should always consult with a qualified tax advisor or legal professional before making any decisions or taking any actions based on the information provided in this blog post.