SBA SOP 50 10 8.1, A.Ch5.B — IRS Tax Transcript/Verification of Financial Information

iii. The requirements in i. and ii. above do not include tax information for the most recent fiscal year if the fiscal year-end is within 6 months of the date SBA received the application. If the Applicant has filed an extension for the most recent fiscal year, the SBA Lender must obtain a copy of the extension along with evidence of payment of estimated taxes. b. SBA Lenders may obtain tax transcripts through either of the following methods:

i. Through the IRS’s Income Verification Express Service (IVES) program: SBA Lenders may either enroll in IVES or contract with an IVES participant. Additional information on IVES enrollment is available at www.irs.gov/individuals/ives-enrollment-procedures. Or;

ii. By fully completing and submitting IRS Form 8821: a) SBA Lenders must ensure the type of transcript requested contains any changes to the original return. b) The SBA Lender must be listed as designee on line 2 of IRS Form 8821. If the SBA Lender uses an LSP for the application, both the SBA Lender and the LSP must be listed as designees on line 2 of IRS Form 8821. c) SBA will not permit the borrower or its own tax preparer or enrolled agent to file IRS Form 8821 for an SBA loan. c. If the IRS advises that it has no record on the Applicant or no record of any of the required years of transcripts, no disbursements may be made on the loan and either the loan must be canceled, or the closing must be postponed until the issue is resolved unless the SBA Lender can document that the requirements of h. below have been fulfilled. d. For loans where 3 years of transcripts are required: If the IRS transcript reflects “Record Not Found” for the middle year of the 3 years requested, and the SBA Lender has verified the other 2 years, AND the Applicant has some record of either receiving a refund or paying the taxes for the missing year, then the SBA Lender may reasonably assume that the Applicant filed a return for the missing year. If the SBA Lender documents all these steps in its loan file, the SBA Lender has demonstrated to SBA that it has made a good faith effort to satisfy the verification requirement. e. If the Applicant has filed an amended return: The Lender must follow all steps in this section to obtain and retain copies of the IRS tax transcript(s), when required. If the amended return transcript is not available from the IRS, the Lender must obtain a copy of the signed amended return for verification of financial records and obtain evidence of filing the amended return. Evidence may include an electronic filing acknowledgement (IRS Acceptance Report), Certified Mail receipt (USPS Form 3800), Certified Mail return receipt, or USPS delivery confirmation, stamped amended return by IRS, or a letter from the Accountant or CPA. f. If the SBA Lender does not receive a response from the IRS or the copy of the tax transcript within 10 business days, the SBA Lender must follow up with the IRS to obtain and verify the tax data by resubmitting a copy of IRS Form 4506-C or IRS Form 8821 to IRS with the notation “Second Request” in the top right-hand side. Any significant differences must be resolved to the satisfaction of the SBA Lender, and, if processing the loan under non-delegated procedures, to the SBA loan processing center. i. For a 7(a) Lender processing a loan under its delegated authority, the Lender may proceed to close and disburse the loan; however, if the Lender disburses the loan and is unable to obtain the tax transcript and, when applicable, reconcile the tax transcript with the financial data provided by the Applicant, the guaranty may be subject to repair or denial; ii. For a CDC processing a 504 loan under PCLP or ALP Express authority, the CDC may proceed to close and disburse on the interim loan, however, the CDC may not submit the closing package for the debenture sale until the CDC is able to reconcile the IRS information. g. SBA Express and Export Express Programs: i. If the Lender uses business financial information to determine the creditworthiness of an SBA Loan, the Lender must follow the IRS tax verification process set out in this section. ii. If the Lender does not use business financial information to determine creditworthiness, such as with some credit scoring models, Lender must obtain IRS tax transcripts in order to verify that the returns were filed and for the purpose of determining the Applicant’s size, but reconciliation of the tax transcripts is not required.

iii. SBA Express and Export Express Lenders are authorized to close and disburse a loan immediately if disbursement is requested by the Borrower; however, Lenders must follow-up and verify the business financial data with IRS tax data and must document the loan file accordingly. If, after loan disbursement, the Lender is unable to obtain the tax transcript and, when applicable, reconcile the tax transcript with the financial data provided by the Applicant, the guaranty may be subject to repair or denial. h. No records found: When the SBA Lender is unable to obtain a required tax transcript due to the IRS having no record of the return, SBA will permit the SBA Lender to proceed with loan closing if both of the following have been obtained: i. Proof of filing of the required tax return, either through evidence of an IRS E-file submission or a paper return that has been stamped as received by the IRS, and ii. Proof of payment or refund of tax liability that reconciles with the stated liability on the tax return. If the business’ tax liability is passed through to individual guarantors, the SBA Lender may use IRS tax transcripts for the individuals to verify their payment of taxes. 5. Exception for U.S. Territories: For Applicants located in U.S. Territories when the Applicant is not required to file Federal income tax returns, in lieu of obtaining and verifying tax data from the IRS, SBA Lenders must verify the receipt-stamped copies of the income tax returns filed with the territory’s taxing authority, as applicable. This exception applies any place in this SOP that references tax transcripts.