Taxpayer First Act, Section 2201- How it affect the mortgage industry.

The IRS IVES User Fee Increases on March 1, 2020

Updated Feb 1, 2020

The IRS announced an increase in user fees for 4506-T processing.This increase affects all IVES 4506-T requests with qualified disclosures over two years to fund the development of the IRS modernization for real-time processing. Effective March 1, 2020, the new fee will increase from $2.00 to $5.00 per transcript year requested.

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WHAT IS SECTION 2201 ("Additional User Fee")

On July 30, 2019, the President signed the Taxpayer First Act – an expansive effort to modernize the IRS. 

Section 2201 of this bill addresses the "Modernization Disclosure of IRS Taxpayer Information for third-party income verification" requiring the IRS to:

• develop an automated online processing system to receive third-party income verification forms (4506-T)
• return the IRS tax transcript data in close to real-time.

This modernization aims to reduce delivery turn time significantly from days to within a second. This provision authorizes the IRS to charge a separate user fee on all IVES requests with qualified disclosures over two years to fund the development of the IRS processing system.

The cost analysis to pay for the IRS Application Program Interface (API) system upgrade modernizing transcript processing defines the NEW ADDITIONAL USER FEE. Funding for this automated system will be accomplished by the IRS, increasing the current fee of $2.00 per transcript year to $5.00.

NCS has long advocated IRS development of an API for instant delivery of tax transcripts. The Congressionally mandated API development was included in the Act. The IRS’ fee increase is an attempt to collect program development fees for an IRS API scheduled to launch in 2023. Following the 2023 date, the expectation is that the IRS user fee per transcript year will dramatically decrease due to the improved efficiencies of the new system.

The user fee increase does NOT apply to transcript requests that fall outside the definition of a "qualified disclosure". Under Section 2201, the IRS defines qualified disclosures as "a person seeking to verify the income or creditworthiness of a taxpayer who is a borrower in the process of a loan application".

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WHO IS AFFECTED

The IRS user fee increase only applies to a “qualified disclosure” as outlined in section 6103-c of the Internal Revenue Code of 1986 of return information. A “qualified disclosure” is defined as someone who is seeking to verify the income or creditworthiness of a taxpayer, who is a borrower in the process of a loan application.” If your business is in the “qualified disclosure” category you will be charged $5.00 for each tax year ordered effective March 1, 2020. Any other type of business that orders a tax transcript would be in the “non-qualified disclosure category and will continue to pay $2.00 per tax year requested. An example of a non-qualified disclosure would be tax transcripts ordered for Insurance or Healthcare companies. 

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NCS ADVOCACY

We are very disappointed and frankly surprised at the IRS’ announcement to increase the yearly surcharge an additional $3.00 for a total of $5.00 per transcript year requested. The IRS notified NCS on 12/23 of their intention to enact the fee on March 1, 2020.

NCS has met several times with the IRS to review the cost analysis breakdown. NCS’ SVP Cecil Bowman is one of 8 IVES Working Group advisors involved in the implementation discussions.  “We’re disappointed at the number the IRS has arrived at to deliver the requirements of the Taxpayer First Act," Bowman comments. "This is primarily being shouldered by the mortgage industry as the principal user of IVES. Since the service is doubling the surcharge fee, we believe a portion of the development costs should be deferred until the launch of the service.

NCS is advocating that the IRS raises the surcharge between $1.00 – 1.50 per transcript year to cover the API development, as initially proposed. NCS’s direct advocacy efforts are pointed towards the IRS, Treasury, and members of Congress. Advocacy efforts are directed through NCS trade associations, including the Mortgage Bankers Association (MBA) and the Consumer Data Industry Association (CDIA). Additional advocacy is presented via NCS’s leadership position in the IRS’ IVES Work Group with our industry peers.

We can assure you we’re leveraging all our industry and government relationships to bring about a successful outcome for our mutual interests. Please reach out to your NCS account representative for a quick resolution to questions or concerns related to this matter. You may also contact our general communication inbox at info@NCSTRV.com.