Although the program is just a little over two months old, early reactions to the Internal Revenue Service's Income Verification Express Service have been positive, as users cite the program's rapid turnaround and increased opportunities for low-income borrowers.
Launched in early October, the IVES program offers expedited electronic delivery of client tax and income information, including W-2 forms, 1099s and K-1s.
"It's really quick - it's usually less than 24 hours," according to Paul Littrell, mortgage loan officer for Columbus, Ohio-based Huntington Bank.
Income verification from the IRS used to take anywhere from two weeks to 45 days, depending on the type of form ordered.
Lending institutions, however, aren't the only beneficiaries of the new rapid turnaround. "It is used by taxpayers themselves, as well as lenders and tax professionals on behalf of their clients," explained Eric Smith, a spokesman for the IRS. "Form 4506-T can be initiated by the taxpayer to be delivered to themselves or to any designated third party."
According to Littrell, the new IVES system is particularly beneficial to low-income borrowers. "Oftentimes, they don't have back tax returns," he said, and that can really be a problem when it comes to providing development grant money. "These [grant monies] are mortgage funds that are available in every state." The money is available to low-income borrowers for the purpose of purchasing a home, but "they require three years of tax returns," said Littrell. "It would discourage a lot of people from trying to buy."
The quick turnaround with IVES has opened up opportunities for people in this demographic to acquire money from the grant program and thus buy homes, explained Littrell. "It makes it a whole lot easier to qualify for that program."
How it works
The IVES process begins when a taxpayer fills out a Form 4506-T, Request for Transcript of Tax Return. The taxpayer provides their full name, address, Social Security number (or numbers, if a joint tax return is being requested), and the name, address and phone number of the party who is to receive the information.
The taxpayer should indicate the tax year(s) to be covered by the form, and should be sure to date the form. The 4506-T can only be used to request transcripts for 60 days from the date of the signature, so an undated form leaves the door open for requesting information beyond that 60-day window. And taxpayers who don't fill in the tax year(s) face the possibility of a third party requesting more tax data than they might want to authorize. Up to four years of tax data can be requested on one Form 4506-T.
People and businesses wanting to use the new IVES system need to sign up with the IRS for access to a secure electronic mailbox. The personnel who are to have access to the secure mailbox must be registered individually with the IRS. This one-time registration is expected to take approximately two weeks. IVES registration information is available online at https://la.www4.irs.gov/e-services/registration/index.htm.
Once the secure mailbox is in place, data requested on the Form 4506-T is sent to the password-protected mailbox by an automated process. Unread messages are automatically deleted from the mailbox after seven days; read messages are deleted after three days.
At press time, electronic access to W-2, 1099 and K-1 forms was expected to be fully implemented by the end of November.
The IRS now charges $4.50 per transcript request. Payments will be collected every 30 days, either by credit card or electronic funds withdrawal. Late payments result in temporary suspension from the program.
People who don't have the ability to fax in requests can still submit requests for IVES transcripts by mail. "If requests are mailed, four to five additional days are added to the process," said the IRS's Smith. And for those who aren't in a hurry to receive documents, the old system is still in place: The IRS will still mail transcripts under the old system at no charge.
Smith explained that the decision to go to the fee-based IVES system was driven by the fact that, under the old system, the income verification process was being done using IRS funds that were budgeted for tax processing.
