IMRS Monthly Overview Special Edition – February 2014
(Previously included in the January 2014 Hot Issues Report)
The IMRS Monthly Overview provides synopses of some of the issues received and/or closed by the Issue Management Resolution System staff during the past month. The Monthly Overview informs the public about the work of IMRS and highlights issues that we think would be of most interest to external stakeholders.
RECENTLY CLOSED ISSUES
Policy, Practice, Procedures
IMRS Issue 13-0001826 – Tax return transcripts for mortgage lenders
Issue: Taxpayers often request tax return transcripts to submit to mortgage lenders to verify their income for mortgage loan applications. Some lenders are refusing to accept some types of IRS transcripts.
Response: Taxpayers are eligible to receive a tax return transcript for the most recent year filed once the return has been processed. The timeframe in which a return is processed depends on many factors including when a taxpayer files the return, whether the return is filed on paper or electronically, and if there is a balance due on the return.
- Some taxpayers who are victims of identity theft will receive a Tax Return Database (TRDBV) transcript instead of a traditional transcript.
Due to programming limitations, some tax return transcript requests may need to be accessed through the TRDBV account file by a contact representative instead of through the Transcript Delivery System (TDS). The TRDBV tax return transcripts will look different than the tax return transcript generated by TDS. Some TRDBV tax return transcripts will not contain the name, address and filing status of the taxpayer as recorded on the Form 1040/A/EZ. However, the TRDBV transcript will contain the social security number of the primary taxpayer at the top of the transcript page and all of the information recorded by IRS from the tax return submitted by the taxpayer.
A TRDBV tax return transcript is not necessarily an indication of identity theft on an account. Other issues in processing could cause limitations for generating a transcript through TDS. Providing taxpayers with a TRDBV tax return transcript will ensure they receive the correct tax return information. If a taxpayer has been the victim of identity theft, a TRDBV transcript will ensure that a taxpayer only receives the information from their legitimate tax return, and not the tax return information of an identity thief.
In addition to the TRDBV tax return transcript, the IRS may also issue Letter 3538. Letter 3538 is a verification of non-filing that can be provided to victims of identity theft through a contact representative when a request through TDS cannot be generated. Please do not ask your clients to have the TRDBV or the Letter 3538 date stamped by the IRS. The presence of a date stamp does not change the validity of the TRDBV transcript print or the 3538 letter.
- Taxpayers that file on paper in the local Taxpayer Assistance Center will have the received date stamped on page 1 only.
Taxpayers that file a paper return will only receive a date stamp if the tax return is not timely or if the return is received with a remittance. Tax return transcripts cannot be provided until after the return is processed. Over 90 percent of returns are processed and refunds issued in less than 21 days.
- Tax returns with a balance due, whether filing electronically or on paper, are not processed until the last cycle of the filing season (April 15) and traditional transcripts using TDS are unavailable until the returns are posted.
When a return is processed with an unpaid balance, a notice is generated to the taxpayer to alert them of the remaining amount due. To allow taxpayers to remit any unpaid tax by the deadline and prevent notices from generating unnecessarily, the IRS does not process balance due returns until after the filing deadline.
Effective January 10, 2014, Title 12 of the Code of Federal Regulations (12 CFR § 1026.43(c)(4)), allows mortgage companies and other lenders requiring proof of income to use earning statements and other financial records from the taxpayer in lieu of a tax return transcript.
Search Income Verification Express Service and Tax Return Transcripts on IRS.gov for further guidance.
NOTE: Current and previous reports are also available on this site. The monthly overviews are posted for this year through the current month. You can also access reports for issues closed in prior years on the same page.
We invite you to raise your issues/concerns with your local stakeholder liaison.