Does an Employer/Fiscal Agent (under IRC Sec 3504) need a Tax ID (EIN)?
An employer/fiscal agent will need their own Tax ID EIN. Specifically, the employer will have their own EIN, and the fiscal agent (the entity responsible for performing the employer’s tax returns) will have their own EIN. The employee will still be hired by the employer and their EIN, whereas the fiscal agent will be responsible for distributing wages, federal taxes, and other withholding taxes.
The fiscal agent has to follow a number of regulations and rules regarding how they manage funds. For employers, a fiscal agent is convenient, as the employer themselves does not have to manage taxes, benefits, and other compensation. Since the agent is acting as a “bank,” they are required to act in the best interest of the employers and employees, and required to manage the funds responsibly and to the best of their ability. An example of a fiscal agent would be a payroll service, which deducts money from an employer in a single, lump sum, and distributes it to employees accordingly.