Understanding the 147C Letter: What it is and How to Respond

What is a 147c letter?

The 147c Letters are documents sent by the IRS to businesses. The company is sent a letter asking for information about its EIN or Employer Identification Number. Business owners use the 147c Letter to verify the validity of their EIN to ensure good standing with the IRS. Additionally, the letter requests payroll and tax information from the business.

The IRS 147c Letter should be responded to immediately after receiving it. You can be assessed penalties and interest on your taxes if you do not respond to the letter. In most cases, taxpayers receive their 147c letters in the mail. Please get in touch with a tax professional if you have questions or need assistance responding to the letter.

What Is An EIN, And Why Apply For It?

EIN stands for Employer Identification Number. The IRS assigns taxpayers a nine-digit identification number. It identifying a business entity requires an EIN. To obtain an EIN, you need to apply through the IRS. The process is free. If you require an EIN, you can apply online, by fax, or by mail.

An EIN application is simple and easy to complete. A simple application form can be found on the IRS website; all you need to do is complete and submit it. The EIN will be the official business identification for all official IRS correspondence and documents once you apply for and receive them.

Who can request a 147c Letter?

IRS requests can only be accepted from authorized company representatives or persons authorized with powers of attorney. 

Company Representative: 

The IRS can allow only an owner or an authorized company representative to access the information in the 147c letter.   

Power of Attorney: 

A power of attorney is the second way to obtain a 147c letter. A person can be appointed as an agent by the company, who then must submit the document to the IRS.

Why is a 147c letter Important?

This letter allows business owners to fix errors and mismatches between the business name of their company and its corresponding EIN by utilizing the 147c letter.

A bank requires the company's EIN before it can open a bank account, enroll in the bank's programs, or to open a bank account or enroll in the bank's programs for a given business.  

Businesses can run into problems with multiple corporate entities, and banking information can get underreported. Consequently, the IRS can withhold 28% of credit card revenue when total receipts don't match reported numbers.    

It's common for 147c letters to fix minor errors. The IRS's records can be mismatched with credit card companies' records by adding or omitting a period, comma, or misspelling.

This way, the 147c letter allows you to cross-reference the Taxpayer Identification Number (TIN) with the company's name. By using TINs, the credit card processing company enables owners of businesses to fix errors on time.

How does the IRS send the 147c letter?

There are several steps to the procedure:  

• This IRS employee requests an EIN number for the company and confirms that the person receiving the fax is secure and the only one receiving it.  

• When the representative has confirmed the order, the person will be placed on hold for approximately 35 minutes while the fax is sent.  

• The 147c letter is sent when a company representative answers and confirms.     

IRS 147C letters are only sent via mail or fax. There are two ways to fax: traditional fax machines and digital fax machines. Security reasons mean the IRS doesn't send 147C verification letters via email.

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Why do you need a 147C letter?

You need to know your company's EIN by heart. The IRS requires proof of income for business purposes. If you lose your CP 575, you will also need a 147C. If that's the case, here are some reasons you need to request a copy from the IRS.

Banking and financing

You will need EIN confirmation if you are applying for a business bank account or corporate credit card. Also, you will need it if you want to apply for a loan or seek investment. However, if you still need to get your CP 575, keep in mind that every bank and lender in the US accept 147C letters as well.

You must prove your EIN when engaging in US business banking or corporate financing. Because every business is assigned a unique EIN, banks and financial institutions use this proof to double-check your identity.

Filing tax forms

If you want to file payroll taxes or income tax forms with the IRS, you must provide your EIN. You don't need to send a copy of your CP 575 - all you need is your EIN. A CP 575 notice may be required only in the following situations:

You need to remember your EIN. You may have lost previous copies of your tax returns (as they have your EIN). You need an EIN letter 147C if, in addition to everything mentioned above, you've also lost your CP 575.

Apply Permits for businesses and licenses

Several businesses must obtain licenses and permits to operate legally in the US. The application process in some states requires you to obtain an EIN. For example, if you're a vendor visiting Arizona, you'll have to get a "Transaction Privilege Tax" (TPT) license.

The critical requirement for a TPT license application has an EIN. You are not required to send copies of your EIN confirmation letter with license applications. It would certainly be helpful to have a 147C letter if you lost your CP 575 and cannot recall your EIN.

The enrollment process for Medicare

To benefit from Medicare, you must work in a hospital, clinic, or healthcare facility. When you enroll, all Medicare beneficiaries will be able to receive healthcare services from you. To provide institutional services, you must apply for enrollment with the Centers for Medicare & Medicaid Services (CMS).

In addition to the application, all applicants are required to submit a copy of their EIN confirmation from the IRS. CMS will require a CP 575 or 147C letter to process your application.

Partnering with other companies

You'll need your 147C letter to partner with a business or hire a vendor. It may be necessary for some vendors (such as payroll providers) and merchants (such as payment processing services) to verify your EIN.

For example, QuickBooks requires that its clients send EIN verification letter 147c to the IRS to process direct deposits for their employees. Additionally, they may request this proof for formalities if you ever join forces with another company.

How to request a 147C letter

According to IRS guidelines, a 147C letter can only be requested by a legitimate owner of a business or someone with Power of Attorney (POA) over them. Following are the steps to take if you check either of those boxes:

• Call +1-800-829-4933. You can reach the IRS Business and Specialty Tax line Monday through Friday between 7 am and 7 pm local time (or Pacific time if you live in Hawaii or Alaska).
• Select your preferred language (press 1 for English).
• Press 1 for EIN "Employer Identification Numbers."
• You can press three if you have an EIN but cannot remember it. Your call will be connected to an IRS agent. There may be a delay depending on the time and day.
• If you lost your notice of CP 575, tell the agent you will need an EIN verification letter.

To ensure that you are the business owner or have the authority to be the agent, the agent will ask you a few security questions.

You'll be asked to choose between receiving your 147C letter by mail or fax once you successfully answer all the security questions. You will receive your 147C immediately by fax if you choose the latter. If you do not have a fax machine, you must send your documents by physical mail. In this case, you'll receive your verification letter within four to six weeks. The IRS does not email 147C letters due to security concerns.