The IRS now provides a copy of their much anticipated Form 4506-C on their website (available directly at: https://www.irs.gov/pub/irs-pdf/f4506c.pdf). The purpose of this form is succinctly promulgated by the IRS as follows:
“Form 4506-C was created to be utilized by authorized Income Verification Express Service (IVES) Participants to order Tax Transcript records electronically for a third party. In effort to protect taxpayer information, a policy change was implemented for the Form 4506 series which no longer permits the mailing of tax returns to third parties that have not been vetted through the agency. The IVES program is a fee for service program with external customers guaranteed a 72-hour response. This collection impacts taxpayers by allowing the third parties to request a transcript of a return that will assist with securement of mortgages, loans, student aid, and other benefits.” (see “Supporting Statement A”, available at: https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201908-1545-007)
We are currently reviewing this form, as well as contacting tax verification partners about its implementation. Any modifications we make as a result of supporting this document will be announced on our website (https://compliance.docutech.com/).
UPDATE: The IRS is now accepting Form 4506-C for submissions sent through IVES and will require this form to be used for this system starting March 1, 2021. However, FNMA, FHLMC, FHA, VA, and USDA all have differing requirements as to what forms should be used to obtain the borrower’s tax script. The following is a summary of these requirements:
FNMA: Requires Form 4506-T to be used. It only permits Forms 4506, 4506-T-EZ, and 8821 to be used in lieu thereof (see FNMA 2020 B3-3.1-06; see also B3-3.1-02 & B5-7-03).
FHLMC: Requires Form 4506-T to be used, but also states that “an alternative form acceptable to the IRS that authorizes the release of comparable tax information” may be used (see FHLMC Single-Family Seller-Servicer Guide ch. 5302.5).
FHA: Forms 4506-T, 4506, and 8821 are listed as being interchangeable and acceptable, but no other documents are specified (see FHA Single Family Handbook 4000.1 II.A.b[ii][C] & [x][C], II.A.c[ii][C] & [x][C]).
VA: The VA has noted that Form 4506-T is not required (see VA Circ. 26-20-19), though its Lender’s Handbook does reference it and other IRS forms (see VA Lender’s Handbook ch. 4, 8[d] & [e] for details). In some of these cases, the Handbook does state that an alternative form acceptable to the IRS is a permitted substitute for Form 4506-T.
USDA: Form 4506-T is required, with no substitutions referenced (see RD HB-1-3555 ch. 9.3[E] and Att. 6-A).
Because FNMA, FHA, and USDA have inflexible rules regarding which IRS form(s) should be used, we will postpone updating our generic copy of Form 4506-T to Form 4506-C until more clarification is provided by these entities as to when they will accept such form. If no clarification is given by mid-December, we will re-assess the situation.
UPDATE: In a “Featured News” email sent on November 10, 2020 FNMA announced the following:
“In: 4506-C . . . Out: 4506-T
Effective March 1, 2021, only the new IRS Form 4506-C will be accepted through the Income Verification Express Service (IVES) to provide tax transcripts to third parties. This means mortgage lenders will need to have borrowers sign Form 4506-C to give permission for obtaining their tax transcripts. The December Selling Guide update will include changes to align with this requirement.”