IRS reopens income verification service despite shutdown

Despite the partial government shutdown, the Internal Revenue Service has reopened the Income Verification Express Service used by mortgage lenders to verify borrowers’ income, relying on user fees to help pay the salaries of IRS employees working in the unit.

Timothy Fadek/Bloomberg

Approximately 70,000 IRS employees have been on unpaid furlough since the partial government shutdown began on Dec. 22, but the move to reopen the IVES program reportedly came after a request from the Mortgage Bankers Association to senior officials in the Treasury Department, according to the Washington Post. The inability to process the tax transcript forms was holding up mortgage applications around the country. However, the move has come under criticism for allowing a carve-out in the government shutdown to benefit a specific industry.

As a result, 400 furloughed IRS employees were called back to work on Monday in Cincinnati, Ohio; Ogen, Utah; Kansas City, Missouri; and Fresno, California; and are being paid. The IRS announced last Monday that it was calling back a number of employees to help with tax season, the new tax law, and to make sure tax refunds are processed in time, although most of them will have to wait to get paid until after Congress and President Trump agree on a deal to end the shutdown (see IRS will pay refunds during the shutdown, easing pressure for a deal).

In a statement last week, the IRS explained its decision to reopen the IVES service.

“While the IRS remains closed during the partial government shutdown, the agency recognizes the immediate hardship incurred if information is not available through the Income Verification Express Service (IVES) program as well as by taxpayers who have been unable to certify their residency in the United States for certain tax treaty benefits or by those who have been unable to obtain photocopies of tax returns,” said the IRS statement. “Following an extensive review, the IRS began processing requests on Jan. 7 for transcript information made through the Income Verification Express Service (IVES) program. IVES is a user fee-based program used primarily by mortgage lenders and others within the financial community to confirm the income of a borrower during the processing of a loan application. The transcript information is delivered to a secure mailbox based on information received from a Form 4506-T or Form 4506T-EZ.”

However, the IRS warned that the service may not be as timely as usual due to the partial shutdown. “It will take time to bring this service up to normal operating status,” said the IRS. “The IRS advises IVES participants that it may initially take longer than the standard 72-hour turnaround time for the IRS to process these requests. This is due to employees being brought back to work to begin processing backlogged requests since the funding lapse began on Dec. 22.”

The IRS also plans to restart some other services that can be funded with user fees.

“The IRS also will start other user fee-based services such as providing a letter needed by some taxpayers to certify their residency in the United States for certain tax treaty benefits and responding to requests for photocopies of tax returns,” said the IRS. ”The IRS notes that tax transcripts — which show most of the information from a tax return — are easily obtained online more quickly, are free and sufficient for most purposes. Taxpayers who still need a paper copy of their actual tax return may submit a Form 4506 along with a $50 fee for a copy of each return. It may take 75 calendar days to process a request for a copy of a return.”

However, many of the services traditionally performed by the IRS will have to wait until Congress and the president can agree on a solution to reopen the Treasury Department and other parts of the government affected by the shutdown. President Trump has insisted that any deal include $5.7 billion in funding for a border wall between the U.S. and Mexico, but he has come under increasing pressure from some Republican lawmakers over the weekend to agree to end the shutdown.

“Federal law limits what the IRS can do on behalf of taxpayers during a funding lapse; however, some programs funded by user fees present an opportunity for the IRS to help taxpayers receive critical services,” said the IRS. “These services can assist taxpayers trying to obtain mortgages or taxpayers affected by disasters who need copies of their tax returns as part of the recovery effort. The IRS appreciates the patience of taxpayers and tax professionals during this period and encourages continued use of automated applications on IRS.gov, whenever possible.”