147c Letter

What Is 147c Letter?

A 147c letter is a form provided by the Internal Revenue Service (IRS) verifying a business's tax identification number (TIN) or employer identification number (EIN). The letter provides confirmation of the number currently on file with the IRS. It is generally used in instances where the original confirmation is lost or incorrect.

What Is the History of 147c Letter?

The 147c letter does not have a distinct historical context as it is a simple administrative measure used by the IRS. This form has been used since the IRS established the need for businesses to have a Taxpayer Identification Number (TIN) or Employer Identification Number (EIN), which is a unique identifier for businesses similar to a social security number for individuals. The 147c letter's principal function is to verify the TIN/EIN when a business owner has lost or misplaced their original confirmation document. It's an essential tool for the continued smooth operation of many business administrative processes, such as establishing lines of credit, applying for certain licenses, and conducting other transactions requiring verified tax information.

How Do the 147c Letter and Bank Comfort Letter Differ in Purpose and Use?

The 147c Letter and the Bank Comfort Letter serve different purposes and are used in different contexts.

1. 147c Letter: This is a form provided by the Internal Revenue Service (IRS) used to confirm a company's Employer Identification Number (EIN) or Tax Identification Number (TIN). Businesses might need to request this letter when they misplace their original EIN/TIN documentation or need to verify their EIN/TIN for the purpose of business transactions, compliance issues, or banking requirements.

2. Bank Comfort Letter (BCL): This is a letter provided by a bank on behalf of its clients, asserting a willingness to loan a certain amount of money, or confirming the financial good standing or creditworthiness of the bank's client. It's often used in international trade transactions, as a form of assurance to sellers that the buyer has sufficient funds or credit available to cover the cost of the transaction.

So, the 147c letter is affiliated with tax confirmation for a business, while the Bank Comfort Letter is associated with asserting the financial capability of a bank's client.

What Are Some Examples of Bank Comfort Letter?

A Bank Comfort Letter (BCL) can take many forms, depending on the specific assurances that the issuing bank is providing about its client. Here are a few examples:

1. Creditworthiness BCL: A bank may issue a Comfort Letter stating that their client has been a customer for a specific number of years, and they've always managed their accounts in a satisfactory manner. The letter might also affirm that the client has sufficient funds or credit facilities to meet a particular financial commitment.

   ``` [Bank's Letterhead]

   To Whom It May Concern,

   This is to certify that [Client's Name] has been a customer of our bank for the past [number] years. During this period, they have conducted their accounts to our satisfaction. We also confirm, as of [date], [Client's Name] has sufficient credit facilities to meet their financial commitment of [amount].

   Kind Regards, [Bank's Name] ```

2. Willingness to Finance BCL: A bank could issue a letter expressing its willingness to provide a loan to their client for a specific transaction, without creating a legally binding obligation.

   ``` [Bank's Letterhead]

   To whom it may concern,

   We, [Bank's Name], hereby signify our intent to grant loan facilities up to an amount of [amount] to [Client's Name], considering their current financial standings with us and their demonstrated responsibility in dealing with credit facilities.

   Please note that this is not a legally binding document but merely signals our intent to finance.

   Yours Faithfully, [Bank's Name] ```

Please note that while the letters provide assurance, they do not constitute a guarantee. The actual language used will depend on the bank's policies and the specific circumstances of the transaction.

How Do 147c Letters and Verification of Non-Filing Letters Differ in Purpose and Function?

A 147c Letter and a Verification of Non-filing Letter serve different purposes and have different functions:

1. 147c Letter: A 147c letter is an official document provided by the IRS to confirm a business's Employer Identification Number (EIN) or Tax Identification Number (TIN). It is often requested when the original EIN/TIN document is lost or needs to be confirmed for various business transactions or compliance requirements.

2. Verification of Non-filing Letter: This is an official document from the IRS that verifies that the IRS has no record of a filed Form 1040, 1040A, or 1040EZ for the year you request. It is typically used to validate one's income when traditional income verification methods are not applicable, such as for students applying for financial aid or individuals applying for certain types of loans.

So, while a 147c letter is used to confirm business tax identification details, a Verification of Non-filing Letter is used to show that there is no record of personal income tax filing for a certain year.

What Are the Benefits of 147c Letter?

The benefits of a 147c Letter include:

1. Identity Verification: Since a 147c letter is an official document issued by the IRS to confirm a business's tax identification number, it serves as verifiable proof of your business's identity for financial and legal purposes.

2. Avoidance of Penalties: If a business fails to provide the accurate EIN when required, it could face penalties from the IRS. The 147c letter helps companies verify their EIN, helping prevent mistakes and possible penalties.

3. Business Transactions: Organizations often need to provide their EIN in the course of various business transactions, such as setting up payroll systems or opening a business bank account. The 147c letter is an official verification of this number when the original EIN document is lost.

4. Compliance: Certain business compliance requirements may necessitate an EIN. Being able to provide a 147c letter ensures that a business can satisfy these requirements even if the original EIN document isn't available.

5. Ease of Acquisition: If an organization loses its original EIN confirmation document, obtaining a 147c letter from the IRS is relatively straightforward and can be done over the phone. This simplifies the process and reduces the potential downtime for businesses.

Which Businesses Commonly Request a 147c Letter From the IRS and Why?

Businesses of various sizes and across different industries might need to request a 147c letter from the IRS for several reasons.

1. New Businesses: Newly established businesses might request a 147c letter to confirm the correct Employer Identification Number (EIN) initially assigned to them by the IRS, especially before they start complex business transactions, setting up a payroll system, or opening bank accounts.

2. Established Businesses: These might request a 147c letter if they've misplaced or can't locate their original EIN documentation. It's essential for these businesses to confirm their EIN for reporting and filing tax returns, updating business information, or when required for certain transactions or permits.

3. Businesses Undergoing Changes: Companies undergoing significant changes, such as mergers, acquisitions, or ownership transitions, may need a 147c letter to verify their EIN as they navigate these changes.

4. Businesses Applying for Licenses, Loans, Lines of Credit: Businesses may need to provide a 147c letter when applying for various permits, licenses, loans, or lines of credit, as these processes often require proof of an EIN.

5. Businesses Hiring Independent Contractors: If a business hires independent contractors, they may need a 147c letter to ensure their EIN is accurate for the issuance of 1099 forms.

In general, any business entity that uses an EIN and needs to confirm this number for legal, financial, or administrative purposes might request a 147c letter from the IRS.