What can happen if an individual does not provide a TIN when required?

When an individual does not provide a Tax Identification Number (TIN) when required, higher tax withholding may indeed apply. The Internal Revenue Service (IRS) mandates that a TIN, which can be a Social Security Number (SSN) or an Employer Identification Number (EIN), is needed for accurate tax reporting and to ensure that individuals are correctly identified in the tax system.

Without a TIN, employers or payers often classify the payee as "backup withholding," resulting in taxes being withheld at a higher rate than the standard withholding rate. This is an IRS measure to ensure that the right amount of taxes is collected, especially when the individual has not provided the necessary information to verify their tax status.

The other options are not applicable in this situation. An individual not providing a TIN does not lead to receiving a tax refund automatically, nor does it result in being granted an EIN. Additionally, lacking a TIN does not exempt an individual from tax filing obligations; they are still required to file taxes as applicable. Thus, the correct consequence of not providing a TIN is that higher tax withholding may occur.