IRS business tax transcripts: what they show and when to use them

A transcript is a summary of information the IRS has on file. A return transcript shows most line items from the return as originally filed. An account transcript shows activity on the account: when the return was received, tax assessed, payments and credits, penalties and interest, and notices. Transcripts are not copies of your return, but they are accepted by most lenders and agencies for verification.

Use a transcript to confirm that a return was filed and processed, to verify that an estimated payment was credited to the right period, to understand a notice, to look at a balance before you pay it, or to answer a lender who asks for proof of filing. They are also useful when you inherit a company's records and need to see what the IRS has.

Business owners can generally request transcripts through the IRS's online tools for businesses, after identity verification. Tax professionals can request them for clients with proper authorization. A third party, such as a lender or accountant, usually needs a signed authorization form, like Form 8821, to receive your information.

Online access, forms, and processing change from time to time, so follow the instructions on the IRS site.

On an account transcript, look at the codes and dates. They show filing, the assessment, payments, and any penalties. Ask your preparer to explain unfamiliar entries. A payment sitting in the wrong period or an unprocessed return is common and fixable once you see it.

Save each transcript with the return it relates to and note the date you pulled it. If you reconcile the tax liability accounts in your books to the transcript, you will find mismatches early.

The books show a $6,000 estimated tax payment on June 12 for the second quarter. The account transcript lists a $6,000 payment, but dated against the prior year. The money is not lost. It was applied to the wrong period, which is a common result of selecting the wrong year on the payment form. The fix is to contact the IRS with the payment confirmation and ask for it to be moved. Catching it when the transcript is first pulled is much better than finding it in a notice.

Form 8821 lets a named person receive and inspect your tax information. Form 2848 goes further and lets a representative act for you before the IRS. Someone who only needs to see your transcripts, such as a lender's underwriter, needs the first. A preparer who will answer a notice for you needs the second.