Bill Would Require IRS to Accept Electronic Tax Transcripts
January 19, 2017
A bill introduced last year in the U.S. House of Representatives would require the IRS to accept electronic transmission of tax transcripts.
IRS Data Verification Modernization Act (HR 5725) is sponsored by Rep. Patrick McHenry (R-NC).
Under the current system, a loan applicant completes the 4506-T, giving the lender the right to access a summarized version of their tax transcript. The lender then sends the completed 4506-T to a third party service, which then in turn processes the request and submits it to the IRS electronically. The IRS then provides the lender with a summarized tax transcript, which according to industry reports takes two to eight days. According to McHenry’s office, this manual process at the IRS is extremely frustrating for financial technology companies and banks that rely on leveraging data and technology to make faster, informed decision for consumer and small business lending.
In a 2016 white paper, the U.S. Department of Treasury discussed modernizing data verification and mentioned automating the IRS Verification Express Services with a data sharing Application Programming Interface (API). According to the Treasury, this would:
- would reduce operational costs
- reduce paperwork and waiting period burdens on borrowers
- facilitate compliance with consumer protection rules regarding the verification of borrowers’ ability to pay
- potentially expand access to credit
ALTA is helping lead a coalition to pass the bill. For more information, contact Justin Ailes, ALTA’s vice president of government affairs, at [email protected].
Contact ALTA at 202-296-3671 or [email protected].