Update to Taxpayer First Act (HR 3151) // Subtitle C, Section 2201 & 2202

[UPDATED DECEMBER 18, 2019]

The Taxpayer First Act became public law on July 1, 2019. A couple sections of the bill will affect lenders including Section 2201 and 2202. Section 2201 proposes an increase in the IRS transaction fee effective on January 1, 2020. Section 2202 limits redisclosures and uses of consent-based disclosures of tax return information. Here are the essential deadlines to keep in mind;

• December 28, 2019: New Taxpayer Consent Language must be implemented 

• January 1, 2020*: IRS transaction fee increased to $3.00 or each transcript year requested.

• A new IRS form 4506-C to replace the existing IRS Form 4506-T. A sample 4506-C and implementation date are pending at this time. 

*As of December 18, 2019: The IRS has postponed the rollout of transcript fee increase until further notice.

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Section 2201 authorizes the IRS to develop an automated system to receive your 4506T orders and return the IRS tax transcript data in real time versus the current delivery of 4506T via a secure fax system with IRS tax transcript data returned in 48-72 hours. Funding for this automated system will be accomplished by the IRS increasing the current fee of $2.00 per transcript year to $3.00. This user fee is intended to pay for the IRS Application Program Interface (API) system upgrade that will modernize transcript processing, reducing turn times from days to seconds. The new fee becomes effective sometime in early 2020.

NOTE: Section 2201 mandates the tax transcript API must be delivered by 2023. Following the 2023 date, the expectation is that the IRS user fee of $2.00 per transcript year will dramatically decrease due to efficiencies of the new system.

Section 2202 limits redisclosures and uses of consent-based disclosures of tax return information. The current method of taxpayer consent is having your borrower sign the 4506-T. Section 2202 modifies the existing tax code and requires that you inform the borrower of the “express purpose” for which their tax transcript data will be used. In addition, Section 2202 will now require that borrowers provide “express permission” to allow your organization to share their tax transcript data with other loan participants.

It is suggested that you consult with your document prep companies and LOS providers to ensure compliance with Section 2202. The revised Taxpayer Consent Language must be implemented by December 28, 2019.

MISMO has created a model Taxpayer Consent Language: http://www.mismo.org/standards-and-resources/additional-tools-and-resources/taxpayer-consent-language

Should you have further questions you may contact customer service at 800-582-7066.