Transforming Business Verification in 2025: Lessons from the Field

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In today's rapidly evolving financial landscape, access to accurate tax information has become more critical than ever. At ModernTax, we've spent the past quarter deeply engaged with various stakeholders—from government agencies to innovative fintech companies—to better understand how we can revolutionize this crucial aspect of business operations.

The IRS Landscape: Changes and Challenges

Our recent interactions with the IRS have revealed several important shifts that businesses need to be aware of:

Processing Timelines Are Evolving

The IRS continues to experience significant backlogs, with standard processing times for tax transcript requests extending to 3-4 weeks in many cases. This delay creates substantial friction in financial processes that depend on verification of tax information.

Action Item: Schedule a consultation with our team to discuss how our expedited processing can reduce your wait times from weeks to hours.

Digital Transformation Efforts Continue, Despite Political Headwinds

Despite recent administrative changes that have slowed some modernization initiatives, the IRS remains committed to digital transformation. However, the pace of this transformation varies significantly across different divisions and service areas. With the new administration there are constant changes happening in real time. Due to the nature of our business we get a real-time view of how things are changing hour to hour and it is fascinating to say the least.

Authentication Requirements Are Becoming More Complex

We've observed increased scrutiny around authentication requirements, with more rigorous standards being applied to third-party information requests. This means businesses need more sophisticated approaches to successfully navigate these processes.

Pilot Program Revelations

Our work with financial services companies, wealth management firms, and small business lenders has yielded several key insights:

Small Business Filing Patterns

Through our analysis of thousands of small business tax records each week, we've identified distinct patterns in how different types of businesses approach their tax obligations:

1. Entity Structure Misconceptions: Over 40% of the businesses in our current pilot programs had misalignments between their legal entity structure and their tax filing approach. For example, many LLCs file as S-Corps for tax purposes, creating verification challenges. As these businesses evolve however and move into different stages sometimes this filing structure does not make since. We are providing insights to these companies on when it might be time to make a change. If you are a growing business or work with growing businesses, we would love to talk to you about our offering to help businesses save tens of thousands of dollars. You can Schedule a consultation today.
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3. Missing Years Are Common: Nearly 30% of small businesses had at least one missing tax year in their records, often unbeknownst to the business owner. We also provide add-on services to businesses in this position connecting them with an expert that focuses on their specific needs in real-time.
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5. Payroll Tax Compliance Issues: Approximately 25% of businesses with employees had some form of payroll tax discrepancy, ranging from minor reporting errors to significant underpayments. We have seen as much as acruuing balances of upwards of $100,000 or more for some small businesses. We are still seeing lots of issue related to the pandemic era where companies swithed providers made lay offs and simply got behind on payroll payments.
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Action Item: Download our free guide to understanding your business's tax profile and identifying potential compliance issues.

Lender Integration Successes

Our work with lending platforms has demonstrated the substantial impact of streamlined tax verification:

• Application Abandonment: Lenders implementing our solution saw a 35% reduction in application abandonment rates.
• Underwriting Speed: Average time to decision decreased by 41% when using our API-driven approach.
• Risk Assessment Accuracy: Early data suggests a 15-20% improvement in risk model accuracy when incorporating comprehensive tax data.

Wealth Management Applications

Our pilot with wealth management firms revealed several high-impact use cases:

1. Prospecting Enhancement: Advisors using tax data for prospect conversations reported 28% higher conversion rates.
2. Asset Discovery: Firms identified an average of 1.7 previously undisclosed financial accounts per client through analysis of tax transcripts.
3. Tax Planning Opportunities: Advisors identified an average of $12,500 in potential tax savings per high-net-worth client through comprehensive tax record analysis.

Technology Breakthroughs

Our engineering team has been hard at work developing solutions to address the challenges we've identified:

AI-Powered Document Analysis

We are developing sophisticated AI models built on top of open source models as well as closed-source models like Anthropic's Claude to specifically train our systemsto interpret and extract meaningful insights from tax documents across various formats. This technology can:

• Parse complex tax transcripts with 97.5% accuracy
• Identify anomalies and potential errors requiring human review
• Generate plain-language summaries of key findings
• Provide trend analysis across multiple tax years

Action Item: Request demo of our AI-powered tax analysis platform and see how it can transform your verification processes.

Enhanced Authorization Workflows

Our new authorization system streamlines the consent process while maintaining strict compliance with IRS requirements:

• Mobile-optimized signature capture
• Multi-factor authentication options
• Real-time validation of taxpayer information
• Secure, encrypted storage of all authorization documents

API Integration Advancements

We are expanding our API capabilities to support deeper integration with your existing systems:

• Webhook notifications for status updates (April 2025)
• Customizable data output formats (May 2025)
• Comprehensive error handling with actionable feedback (June 2025)
• Detailed audit logs for compliance purposes (July 2025)

Industry-Specific Applications

Different sectors are leveraging our solutions in unique ways:

For Financial Services Companies

• Automated Underwriting: Incorporate real-time tax data into automated decision engines
• Fraud Detection: Validate reported income against official IRS records
• Portfolio Monitoring: Receive alerts when client businesses show significant tax changes

For Accounting Firms

• Client Acquisition: Streamline onboarding by eliminating manual tax record collection
• Advisory Services: Provide more strategic guidance based on comprehensive historical data
• Compliance Monitoring: Proactively identify potential filing issues before they become problems

For Business Service Providers

• Customer Qualification: Verify business legitimacy and financial health
• Service Customization: Tailor offerings based on verified business characteristics
• Customer Support: Resolve tax-related issues more efficiently with direct access to official records

Real-World Impact

The numbers tell a compelling story about the value of modernized tax verification:

• Time Savings: Our clients report an average reduction of 11.5 business days in verification processes
• Cost Efficiency: Administrative costs related to tax verification have decreased by an average of 67%
• Error Reduction: Verification-related errors have dropped by 78% among our active users

Looking Ahead: The Future of Tax Verification

Based on our research and field experience, we see several important trends emerging:

1. Increased Integration: Tax data will become increasingly integrated into broader financial service ecosystems
2. Real-Time Verification: The industry is moving toward near-instantaneous verification capabilities
3. Predictive Analytics: Forward-looking insights based on historical tax data will drive more sophisticated business decisions
4. Enhanced Privacy Controls: New frameworks will emerge to balance data accessibility with stringent privacy protections

Take the Next Step

Ready to transform how your organization handles tax verification? Here are some ways to get started:

• Schedule a consultation with our solutions team
• Register for our upcoming webinar on tax data integration strategies
• Start a free trial to experience our platform first hand

At ModernTax, we're committed to making tax information more accessible, accurate, and actionable for businesses of all sizes. Join us as we continue to innovate at the intersection of tax compliance and financial technology.

This article was published on March 13, 2025. For the most current information about our services and capabilities, please contact our team.

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