Validating a federal tax id number

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In most cases, verification is necessary when you issue taxable payments to the entity.

Depending on the type of entity you work with, you may have to issue a 1099 to the company you pay at the end of the year.

Similar in purpose to the Social Security number assigned to individuals, EINs are used by employers, sole proprietors, corporations, partnerships, non-profit organizations, trusts and estates, government agencies, certain individuals and other business entities.

The IRS uses this number to identify taxpayers that are required to file various business tax returns.

This is why the EIN is not considered sensitive information, and is freely distributed by many businesses by way of publications and the internet. The authority for EIN's is derived from (b), requiring taxpayer identification for the purpose of payment of employment taxes.

The EIN system was created by the IRS in 1974 by Treasury Decision (TD) 7306, 39 Fed. The provision was first enacted as part of the revision of the Tax Code in 1954. An EIN is usually written in the form 00-0000000 whereas a Social Security Number is usually written in the form 0 in order to differentiate between the two.

Before 2001, the first two digits of an EIN (the EIN Prefix) indicated the business was located in a particular geographic area.

In 2001, EIN assignment was centralized at three of the IRS campuses, although all 10 campuses can assign an EIN, if necessary.

Contrary to some misconceptions, credit bureaus and credit issuers can tell the difference between SSNs and EINs.The IRS provides an online service that allows your company to verify the EIN provided to you by the company you hire.Your company may use the matching system if you issued 1099 forms to any workers or entities in at least one of the past two years.The IRS uses this information to confirm your identity.You must create the e-Services account using your personal information.

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