The GAO released report GAO-26-108116 last week. The title alone should make every lender uncomfortable: “Severe Risks to Future IRS Operations.”
The numbers are worse than the title.
17,047 IRS employees walked out the door last year — 17% of the entire workforce. The correspondence backlog now exceeds 6 million unprocessed items. Paper return processing missed the IRS’s own 13-day target, averaging 16 days. And the agency cycled through 7 commissioners in a single year.
I want to put a dollar figure on this because that’s what matters to anyone running an SBA pipeline.
A typical 504 or 7(a) deal can involve 5-12 entities — the operating company, the holding company, the real estate entity, the guarantors, and related businesses. Each one requires a separate transcript request. I talked to a CDC last week that processes 90% business transcripts. Every single deal means multiple pulls across multiple tax years. At a conservative $5,000 in carrying costs per week of delay per deal, a two-week transcript holdup across a 20-deal pipeline costs you $40,000-$100,000 a month in delayed closings.
That’s not a technology problem. That’s a P&L problem.
Three things hit production in the last 30 days that are directly relevant to this:
Tax Payment Verification. You can now verify whether a taxpayer has actually paid the IRS — not just filed. Beyond that payment, we validate the posting and confirmation, which can be complicated with IRS payments. Our endpoints will show payments posted, balances due, penalties, and installment agreements. For 504 and 7(a) compliance, this is the piece that was missing. For tax and compliance companies serving individuals and businesses, this helps with NPS as taxpayers pay upwards of $4T each year. Check out the docs here: https://moderntax.io/docs/#tpv-payment-confirmation
Employment Verification API. W-2 and 1099 income data pulled directly from the IRS delivered via an API endpoint. Same-day returns. If you’re still paying Equifax per-pull fees and waiting 3-5 business days, the math doesn’t work anymore at scale. We’ve been having this conversation with HR teams and background check providers who are tired of paying legacy prices for inconsistent employer-contributed data. IRS Wage & Income data is more authoritative and doesn’t depend on whether the employer opted into a database. Learn how to submit your first requests here: https://moderntax.io/docs/#emp-submit-request
Portal overhaul. The 8821 submission flow inside portal.moderntax.io got rebuilt—fewer clicks, better error handling when the IRS rejects a form, clearer status tracking. We onboarded a new CDC loan processor this week who was up and running within an hour — her words, not mine. She said the ordering process was “pretty much self-explanatory.” That’s the bar.
We talk to lenders, investors, and platform builders every week. Here’s what keeps coming up — and these aren’t hypotheticals. These are from real calls this month.
“We get ‘no record found,’ and our vendor just shrugs.” This one comes up constantly. A lender requests transcripts, the IRS comes back with “no record found,” and the current vendor provides zero context. No help figuring out if it’s a wrong EIN, an entity type mismatch, or a filing gap. The lender is left playing detective — calling the borrower, calling the CPA, sometimes calling the IRS directly. We had a conversation with a lender last month whose team described “extensive back-and-forth between their staff, CPAs, and borrowers” on nearly every failed request. That’s not a transcript problem. That’s a vendor problem. We flag the likely cause — wrong entity classification, missing election status, Schedule C filer who incorporated — and tell you what to request next.
“The borrower says they file as an S-Corp, but the transcript says otherwise.” Entity filing confusion is one of the biggest hidden delays in SBA lending. A business tells you they’re filing 1120S, but the IRS has them as a C-Corp or a partnership. If you request the wrong form type, you get a blank transcript and lose a week. We see this so often that we now request 1065, 1120, and 1120S simultaneously and flag when the election status doesn’t match what the borrower reported. One bank I demoed for said this mismatch alone was causing 60-90 day delays on certain deals.
“Our vendor still requires wet signatures, and it’s killing our close times.” I hear this one from CDCs and banks every single week. Their current provider — and I’ll let you guess which ones — won’t accept electronic signatures on 8821 forms. So the loan processor has to email the form, wait for the borrower to print it, sign it, scan it, and email it back. In 2026. We support full electronic signature collection. It’s not a nice-to-have. It’s the difference between a 24-hour turnaround and a 7-10 day one before you’ve even submitted to the IRS.
“We’re paying $100-150 in rush charges just to get transcripts on time.” This one is a pricing problem disguised as a service problem. Some vendors charge $100-150 for expedited processing on top of their per-pull fees, plus $500+ monthly minimums. One lender told me they use two different platforms just to manage costs — one for standard requests, one for rush. That’s two logins, two workflows, two vendor relationships. We don’t charge expedited fees. Same-day is the standard. No monthly minimums.
April 9, 2026:
By the end of 2027, “same-day IRS transcripts” will be table stakes for any SBA lender closing more than $10M/year in 504 or 7(a) volume. The lenders who are still faxing 4506-C forms and waiting 2-4 weeks will either modernize or lose deals to the ones who already did.
The GAO report makes this timeline clearer, not murkier. The IRS isn’t going to fix this. Not with 17,000 fewer people. Not with 7 commissioners in a year. Not with $80B in funding that’s being clawed back before the systems are finished.
The market will route around the bottleneck. The only question is whether you’re on the fast side or the slow side.
We’re on the road. Come talk to us in person:
Apr 27-29 — NAGGL Spring Conference, Orlando. We’ll be demoing Tax Payment Verification live. If you want to see it before everyone else, reply and I’ll get you 15 minutes.
May 12-14 — nCino nSight, Charlotte, NC
May 17-20 — NADCO Spring Summit, Arlington
Jun 9 — CDAO New York
Jun 15-17 — NACLB, Miami
If you’re at any of these, hit reply. No booth pitch. Real conversation about what you’re trying to solve.
The links that shaped this week’s thinking. Worth your time if you’re in lending, tax, or fintech.
2025 Tax Filing: Severe Risks to Future IRS Operations. (GAO) — U.S. Government Accountability Office, March 2026 (Link)
Accounting Today: IRS Navigates Tax Season Amid Staffing Cuts. Covers the 5,162 filing-season staff departures and 7-commissioner churn. (Link)
IRS Staff Exodus Threatens Severe Risks, GAO Says: Focuses on the 6M+ correspondence backlog and workforce crisis framing. (Link)
IRS Found to Lack Plan to Shrink Taxpayer Correspondence Backlog: Key finding: IRS has no plan to reduce the backlog. (Link)
IRS Has No Plan to Reduce Backlog of Taxpayer Correspondence, Watchdog Finds (Link)
All stats used in the newsletter are sourced from GAO-26-108116. Review the articles above to verify claims before publishing.
Thanks for reading Pulse. If this was useful, forward it to someone who’s still waiting on transcripts.
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