Much like medical and law offices, the Internal Revenue Service (IRS) needs permission from individuals to share their information with other people or entities, including small business lenders. IRS Form 8821 is the paperwork the IRS uses to collect that permission and keep a record of it.
IRS Form 8821 and Small Business Loan Applications
Form 8821 does not give the IRS permission to share tax information with anyone who asks for it. Each time the form is completed, it grants access to one specific “authorized representative”, like an accountant or small business lender.
In addition to financial statements, FICO scores, personal credit scores, and SBSS scores, lenders rely on tax returns as one of the main sources of information about a business’s income, which is essential to determining if the borrower will be able to repay their small business loan.
That’s where Form 8821 comes in.
When a lender can access an applicant’s tax information directly from the IRS, this saves the lender and the applicant time and helps to prevent errors and fraud.
If the lender cannot access the information directly from the IRS, the applicant has to provide it themselves. Large files, inconsistent formatting, and alterations to the documents make mistakes and delays common, so a direct link between the lender and the IRS smooths out the process for everyone.
What Information is Needed for IRS Form 8821
Form 8821 asks for:
- Basic information, including name, address, phone number, and social security number
- Information about the authorized representative: name, address, phone number
- What tax information to share: the applicant can specify what tax information to share with the lender. This can be all of their information, or targeted matters like returns, notices, etc.
- Signature: permission isn’t official without it!
Being asked to access information from the IRS can sometimes give applicants pause. Learning the reasoning can help ease your mind, and your loan application process.