The federal government assigns Social Security numbers to identify its accounts with the Social Security Administration. The SSA keeps track of earnings and retirement benefits using this number, and mails an annual statement to everyone with a number. The numbers serve a range of additional purposes, from employment and taxes to verification of identity.
Companies require Social Security numbers from all employees, as both a source of identification and to comply with all federal, state and local tax and reporting requirements. Employers use these numbers to make necessary contributions to their workers' retirement accounts, and must report all amounts using a W-2 form. Self-employed people must also pay into the Social Security system by filling out an SE form with their personal tax returns and making the appropriate payments directly.
All banks require a valid Social Security number prior to opening any form of account, including checking, savings, certificates of deposit, credit cards, vehicle loans and mortgages. They use this for exclusive identification purposes, as no two people have the same number. Financial institutions and companies are also required to report all interest and dividends paid, as well as interest charged, by using this unique identifier.
Taxes and Benefits
Federal, state and local governments require the Social Security number to keep track of individual accounts. These cover an array of payment and benefit accounts, which in addition to taxes include Medicare, Medicaid, food stamps, housing assistance, grants and other programs. The Internal Revenue Service also uses this number to issue tax refunds for all overpaid amounts and credits.
The Social Security number's sensitive nature that affects so many of life's avenues makes its confidentiality essential. People who unscrupulously obtain it can apply for credit and jobs under false pretenses, which can be time-consuming and costly to rectify for the person assigned the number. The Social Security Administration is charged with guarding this information closely, and releases it only upon written permission or to comply with applicable laws.
What Is a Federal Employer Identification Number?
A Federal Employer Identification Number (EIN) is a nine-digit number assigned by the Internal Revenue Service (IRS) in the following format: XX-XXXXXXX....
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