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Verification of Financial Information to Tax Transcripts

Prior to submitting an application for an SBA loan, lenders must obtain income tax return transcripts from the IRS.  The lender must verify the transcripts to information provided by the borrower and used by the lender to evaluate repayment of the loan.  For delegated lenders (PLP or SBA Express), the transcripts must be obtained and verified prior to first disbursement.

The SBA requires that the tax verification process be documented in the credit memo and must determine if:

  1. The small business applicant filed business tax returns; and
  2. The small business applicant’s financial statements provided as part of the application agree with the business tax returns submitted to the IRS.

The lender must verify the Schedule C for a sole proprietorship and for a change of ownership, the lender must verify the seller’s business tax returns.

Tax transcripts may be requested by submitting an IRS Form 4506-T to the Internal Revenue Service in order to obtain federal income tax information on borrowers for the last 3 years.  For quicker responses, the Internal Revenue Service (IRS) has implemented the Income Verification Express Service (IVES) program which is an expedited service that lenders can use to confirm the income of a borrower during the processing of a loan application. Under IVES, the IRS can electronically provide tax return transcript generally within two business days to a third party with the consent of the taxpayer. More information on how to obtain access to and utilize the IVES system can be found at:  http://www.irs.gov/Individuals/Income-Verification-Express-Service.