4506 T Form SBA | 4506 IRS | 4506C Form | SBA Loan Tax Return Requirements
The Form 4506-C Nightmare
If you are still using Form 4506-C, you’re probably familiar with the painful weeks or longer wait times only to receive limited financial information or an outright rejection without any explanation. Lenders using Form 4506-C can expect a 30-40% rejection rate, often without any reason. This is compounded by the processing times found with the IRS’ Income Verification Express Service (IVES) system. This leaves lenders in the lurch while small businesses desperately need a loan and are delayed by weeks or even months.
But there’s a better way – by utilizing Form 8821 and working with Legacy Tax & Resolution’s team of experts, you can get you tax return transcripts in as little as four hours.
SBA Releases Information Verification Guidelines Utilizing Form 8821
SBA recently issued SBA Procedural Notice 5000-829416 (effective March 9, 2022). This procedure notice provides clear guidance allowing both the IRS Form 8821 and Form 4506-C to request tax return transcripts and tax data for your SBA’s 7(a) and 504 loan programs. IRS Form 8821 is an IRS transcript request form used by practitioners for decades to acquire information from the IRS. Form 8821 is your way to a faster, more straightforward, more thorough credit underwriting process.
How Should an SBA Lender Utilize IRS Form 8821?
Increased speed isn’t the only benefit of using Form 8821. Using Form 8821 and working with Legacy Tax & Resolution Services, we can significantly increase the breadth and depth of the financial information available to lenders. Using Form 8821, Legacy Tax & Resolution Services provides a full federal tax compliance report, including Forms 1120, 1120-S, 1065, 1040, 940, and 941 returns (and more). As part of our process, we provide tax return transcripts for all SBA-required years and all required income tax forms. Form 8821 and Legacy Tax & Resolution Service can provide financial information not available with Form 4506-C, such as a borrower’s federal tax compliance information. All this is offered to help lenders better assess a loan applicant’s creditworthiness.
Utilizing the tax compliance data from Form 8821 and our Legacy Tax Liability Risk Assessment Report goes far beyond identifying federal tax liens. Note: IRS only officially files 80% of the time a business has tax debt. It also includes missing return filing status, tax debt for which a tax lien was not filed, payment agreement compliance information, and payroll tax deposit records.
Form 8821 has been central to Legacy Tax & Resolution Services’s process since we started over 25 years ago. We’re proud of our track record in helping lenders utilize Form 8821 to create efficiencies in the underwriting process. Our expertise with Form 8821 and IRS tax compliance data can also help reduce risk through Tax Liability Risk Assessment and ongoing monitoring.
What Makes Legacy Tax & Resolution Services Different From the Competition?
Legacy Tax & Resolution Services is primarily a tax resolution firm that is exceptionally expert at providing tax compliance information to lenders to assist in their lender due diligence. This means we can provide all the same information to our lenders, but we are here for your borrower if they get into trouble. More importantly, we will monitor your borrower’s tax account in real-time and inform both the lender and the taxpayer of any problems. The find out more about our monitoring services, check out Audit Alarm. We can notify your borrower and you if the borrower is going to be audited up to 6 months in advance. We can provide an alert on an IRS notice, including installment agreement defaults, weeks or months in advance. We can provide notification of missing income on the return up to a year in advance. One of the biggest threats to a business and a lender’s collateral is payroll tax fraud. To counter this threat, we monitor payments to ensure payroll tax deposits are being made and/or not misapplied.