Business Operations Systems & Svcs., d/b/a Computerized Payrolls, a payroll preparation service in Cheektowaga, New York, asked whether it must furnish its own employer identification number (EIN) to its employer-clients so they can complete the WT-1 Return of Tax Withheld filed with New York State, and if so, whether it could instead give clients a different identification number.

Subject

Issue raised by Petitioner, Business Operations Systems & Svcs., d/b/a Computerized Payrolls, is whether it must furnish its employer identification number (hereinafter "EIN") to clients for purposes of the WT-1 Return of Tax Withheld required to be submitted to New York State, and if so, can a different identification number be used.

Plain-English summary

Business Operations Systems & Svcs., doing business as Computerized Payrolls, was a payroll preparation service located in Cheektowaga, New York. It asked the Department whether it had to give its own employer identification number (EIN) to the employer-clients it served, so those clients could list it on New York's WT-1 Return of Tax Withheld, and whether it could instead provide some other kind of identifying number.

Petitioner argued it wasn't really a "paid preparer" of the WT-1 at all - it described itself as simply supplying "answers to math problems" for its clients. It said it didn't make any judgment calls or offer opinions that would affect what an employer or employee owed, and for most of its clients it never even completed or looked at the actual WT-1 form.

The Department worked through several rules to answer the question. Tax Law § 697(a) gives the Commissioner broad authority to require the facts and information needed to enforce the personal income tax law. Under Reg. § 174.1(a), every employer that withholds New York personal income tax must file a WT-1, and Reg. § 174.7 confirms that "New York State employer's return" includes the WT-1. The key rule was Reg. § 158.1(c), the identifying-numbers regulation: anyone who must be listed on a New York tax return filed by someone else has to furnish that filer with an identifying number, and the filer must request and include it. Finally, Reg. § 174.5(a) specifies that an employer's identification number for these purposes must be its EIN - the same number as its federal EIN - and an employer cannot have more than one.

Putting these together, the Department found that because the WT-1 requires an employer to list the name and identification number of the payroll service it uses, the payroll service (here, Petitioner) is a "person" about whom a return is being filed by another (the employer-client), and so it must furnish an identifying number under Reg. § 158.1(c). And per Reg. § 174.5(a), that number must specifically be the payroll service's EIN - no substitute number will do. So the Department answered both parts of the question: yes, Petitioner must give clients its EIN, and no, it cannot use a different number instead.

The Department also added an unrequested but important caveat. Under Reg. § 153.6(b), if a payroll service gives its clients enough information and advice that filling out the WT-1 becomes largely a mechanical or clerical task, the payroll service is treated as an "income tax return preparer" - even if it never actually enters or checks the numbers on the return itself. And Tax Law § 658(g) together with Reg. § 153.6(a) require an income tax return preparer to manually sign the return before the taxpayer signs it, and to include the required identifying number(s) on it. The opinion didn't decide whether Petitioner's actual level of involvement crossed that "largely mechanical" threshold - it simply flagged the standard as something Petitioner's "just doing math" self-description might not fully escape.

What this means for you

Payroll preparation services

If you run a payroll service and any of your employer-clients withhold New York personal income tax, expect that you must supply your EIN - not a substitute number - to those clients so they can complete their WT-1 Return of Tax Withheld. Describing your role as purely mechanical ("just answers to math problems") does not exempt you from this identifying-number obligation. Separately, watch how much guidance and advice you give clients: if your involvement makes completing the WT-1 largely a clerical exercise for the client, you may be treated as an "income tax return preparer" under Reg. § 153.6(b), which brings its own signature and identification requirements under Tax Law § 658(g) and Reg. § 153.6(a).

Employers who use a third-party payroll service

When you file your WT-1 Return of Tax Withheld, you are required to list the name and identification number of the payroll service you use. Reg. § 158.1(c) puts the burden on you to request that number from your payroll service, and puts a corresponding burden on the payroll service to provide it. If your payroll service resists giving you its EIN, this opinion confirms New York regulations require it.

Accountants and tax professionals advising payroll services

Don't assume that "we don't complete or see most of our clients' WT-1 forms" insulates a payroll service from either the identifying-number rule or preparer status. The identifying-number obligation under Reg. § 158.1(c) and § 174.5(a) applies regardless of how much substantive work the service performs, simply because the service's name and number must appear on the client's WT-1. Separately assess, client by client, whether the level of guidance provided crosses the § 153.6(b) "largely mechanical" line into preparer territory.

Common questions

Q: Does a payroll service have to give its EIN to every client, or only clients it actually prepares WT-1 forms for?
A: The opinion doesn't limit the EIN-furnishing obligation to only the clients whose WT-1s the payroll service completes. Because the WT-1 requires every employer to list the name and identification number of the payroll service it uses, the obligation flows from the fact that the client's return requires that information - regardless of how much substantive preparation work the payroll service performed for that particular client.

Q: Can a payroll service use a different number, like a state-assigned ID or an internal account number, instead of its EIN?
A: No. The Department was explicit that only the EIN satisfies the requirement, because Reg. § 174.5(a) ties the identifying number specifically to the employer's EIN, which must match its federal EIN.

Q: Does furnishing an EIN to clients automatically make the payroll service an "income tax return preparer"?
A: No - these are two separate issues in the opinion. Furnishing the EIN is required under Reg. § 158.1(c) and § 174.5(a) regardless of preparer status. Separately, Reg. § 153.6(b) can make a payroll service a "preparer" if it gives clients enough information/advice that completing the WT-1 becomes largely mechanical for them - a fact-specific question the opinion flagged but did not resolve for this Petitioner.

Q: What happens if a payroll service refuses to provide its EIN to a client?
A: The opinion cites Reg. § 158.1(c)(6), which points to the penalty provision in Tax Law § 685(k) for failure to supply identifying numbers. The opinion does not detail the specific penalty amount, but it confirms that a legal consequence attaches to noncompliance.

Q: If the payroll service is later found to be an "income tax return preparer," what additional obligations apply?
A: Under Tax Law § 658(g) and Reg. § 153.6(a), the preparer must manually sign the New York return in the designated space after completing it and before the taxpayer signs it, and the return must show the identifying number(s) - social security number and/or EIN - needed to identify the preparer, the preparer's employer, or both, as required by the form's instructions.

Citations and references

• Tax Law § 697(a) - gives the Commissioner authority to administer and enforce Article 22 and to require facts and information needed for enforcement
• Tax Law § 658(g) - requires an income tax return preparer to manually sign the return before it is presented to the taxpayer for signature
• Tax Law § 685(k) - penalty provision for failure to supply required identifying numbers
• Personal Income Tax Regulations § 174.1(a) - requires every employer withholding NY personal income tax to file a WT-1
• Personal Income Tax Regulations § 174.7 - clarifies that "New York State employer's return" includes the WT-1 return of tax withheld
• Personal Income Tax Regulations § 158.1(c) - the identifying-numbers rule requiring persons listed on another's return to furnish an identifying number, and requiring the filer to request and include it
• Personal Income Tax Regulations § 174.5(a) - requires an employer's NY identifying number to be the same as its Federal EIN, and bars having more than one EIN
• Personal Income Tax Regulations § 153.6(a) - requires an income tax return preparer to manually sign the return and include required identifying numbers
• Personal Income Tax Regulations § 153.6(b) - a payroll service that gives clients enough information/advice to make completing a return largely mechanical is an income tax return preparer

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/income_ao_1992.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/income/a92_4i.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-92 (4) I
Income Tax
July 14, 1992

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. I920422C

On April 22, 1992, a Petition for Advisory 0pinion was received from
Business Operations Systems & Svcs., d/b/a Computerized Payrolls, 17 Delray
Drive, Cheektowaga, New York 14225.
The issue raised by Petitioner, Business Operations Systems & Svcs., is
whether it must furnish its employer identification number (hereinafter "EIN")
to clients for purposes of the WT-1 Return of Tax Withheld required to be
submitted to New York State, and if so, can a different identification number be
used.
Petitioner contends that it is not a paid preparer of the WT-1 Return of
Tax Withheld, but is a payroll preparation service. Petitioner supplies answers
to math problems. It does not make any arbitrary decisions or judgments or offer
opinions to affect what an employer or employee owes in their personal or
business tax returns. Petitioner does not complete or even see the WT-1's of the
majority of their clients.
Section 697(a) of the Tax Law provides that the Commissioner of Taxation
and Finance shall administer and enforce the tax imposed by Article 22 and is
authorized to make such rules and regulations, and to require such facts and
information to be reported, as he may deem necessary to enforce the provisions
of Article 22.
Section 174.1(a) of the Personal Income Tax Regulations (hereinafter
"Regulations") provides that, except as otherwise provided, every employer
required to deduct and withhold New York State personal income from wages under
Article 22 of the Tax Law must file a New York State employer's return of tax
withheld on form WT-1.
Section 174.7 of the Regulations provides that, unless
the context clearly requires otherwise, any reference in such Regulations to "New
York State employer's return" shall be deemed to include reference to the "New
York State employer's return of tax withheld" referred to in section 174.1 of the
Regulations.
Section 158.1(c) of the Regulations provides:
Identifying numbers.
(1) Every person required to make or file a
New York State income tax return, statement, document, or other form
prescribed by the [Commissioner of Taxation and Finance] must
include on the New York State income tax return, statement,
document, or other form being made or filed, an identifying number
or numbers in the form of social security numbers, employer
identification numbers, or other numeric designations suitable for
proper identification of such person.
(2) Any person with respect to whom a New York State income
tax return, statement, document, or other form prescribed by the
[Commissioner of Taxation and Finance] is required to be made or

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Income Tax
July 14, 1992

filed by another person under the authority of this Subchapter, must
furnish such other person with an identifying number or numbers in
the form of social security numbers, employer identification
numbers, or other numeric designations suitable for securing proper
identification of the person with respect to whom the New York State
income tax return, statement, document or other form is required to
be made or filed.
(3) Any person required under the authority of this Subchapter
to make or file a New York State Income tax return, statement,
document, or other form prescribed by the [Commissioner of Taxation
and Finance] with respect to another person must request from such
other person and must include on the New York State income tax
return, statement, document, or other form being made or filed for
such other person, an identifying number or numbers in the form of
social security numbers, employer identification numbers, or other
numeric designations suitable for securing proper identification of
such other person.
. . .
(5) The [Commissioner of Taxation and Finance] may require
such information as may be necessary to assign an identifying number
to any person subject to the provisions of this Subchapter.
(6) For penalty for failure to supply identifying numbers, see
subsection (k) of section 685 of the Tax Law.
Section 174.5(a) of the Regulations provides that each employer must be
identified by a New York State EIN which is the same as the employer's Federal
EIN. An employer cannot have more than one EIN.
Since the WT-1 Return of Tax Withheld requires an employer to provide the
name and identification number of the payroll service that it uses, the payroll
service must provide such information to the employer pursuant to section
158.1(c) of the Regulations. The payroll service identification number required
to be furnished is the payroll service's EIN, pursuant to section 174.5 of the
Regulations.
Accordingly, Petitioner must furnish its EIN to its clients for purposes
of completing the WT-1 Return of Tax Withheld.
Petitioner cannot use a
different identification number.
It should be noted that pursuant to section 153.6(b) of the Regulations,
where a payroll service provides its clients with sufficient information and
advice so that completion of the WT-1 return is largely a mechanical or clerical
matter, such payroll service is considered an income tax return preparer, even
though such person does not actually place or review placement of information on
such return.
Section 658(g) of the Tax Law and section 153.6(a) of the Regulations
provides that an individual who is an income tax return preparer, with respect
to a New York State income tax return, must manually sign such return in the
appropriate space provided on the New York State income tax return after it is

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Income Tax
July 14, 1992

completed and before it is presented to the taxpayer for signature.
Also, any
New York State income tax return prepared by an income tax return preparer shall
bear such identifying number (social security number and/or EIN) necessary for
securing proper identification of such preparer, such preparer's employer, or
both, as may be required by forms and instructions.

DATED:

July 14, 1992

NOTE:

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.