Ok i just went to paypal and checked this out. It is correct why they are asking you to provide because you met one of the requirments and you are close to the other as per this:
What is Internal Revenue Code (IRC) Section 6050W? Under the new legislation, we’ll report to the IRS the total payment volume received by US account holders whose payments exceed both of these levels in a calendar year:
$20,000 USD in gross payment volume from sales of goods or services in a single year
200 payments for goods or services in the same year
The IRS changes apply to all payment providers, including PayPal and include all sales that occur on or after January 1, 2011, with the first reports going to the IRS in early 2012. Our goal is to help PayPal sellers understand and comply with the new requirements.
Before your payment volume exceeds the reporting thresholds, you’ll be asked to add your tax ID number, such as a Social Security Number (SSN) or Employer Identification Number (EIN), to your existing account(s), if you don’t already have one on file