American Academy of Professional Coders (AAPC) Practice Exam

What is the purpose of the EIN?

1. Issued to patients for tax purposes

2. Registered with insurance companies

3. Issued to employers by the IRS

4. Provided to employees for healthcare access

The correct answer is: Issued to employers by the IRS

The purpose of the Employer Identification Number (EIN) is to serve as a unique identifier for businesses and is issued to employers by the Internal Revenue Service (IRS). This number is essential for several administrative and tax-related functions, including filing tax returns and making tax payments. Businesses use the EIN when reporting taxes, applying for tax-exempt status, or hiring employees. It is crucial for identifying the business entity in various transactions and dealings with the IRS and other government agencies. In contrast, the other options do not accurately represent the primary function of an EIN. While patients may have identifiers related to their health care, these would not be classified as an EIN. Insurance companies might require various information but do not register the EIN specifically for their records. Lastly, while employees may receive identification relevant to their healthcare access, this would typically pertain to different identifiers like Social Security numbers or insurance cards rather than an EIN.