IRS makes borrowing, lending less taxing

The financial industry will no longer have to wait two days for tax information to verify a borrower’s income.

The Internal Revenue Service is cutting the time it takes to reply to mortgage firms with personal and business tax returns on potential borrowers with a new Income Verification Express Service that sends electronic tax transcripts, according to a business coalition announcement.

The Fraud Prevention Coalition, an alliance of companies working to improve tools to prevent mortgage fraud, said the IRS completed the development of a system providing secure electronic return of tax transcripts. The new service is expected to take effect Oct. 1, the coalition said.

Lenders use tax transcripts to confirm a potential borrower’s income. The transcripts can detect fraud, according to the coalition. The IRS will add other forms, such as W2s, 1099s and K1s, to the program 30 to 60 days after the service goes into effect, the coalition added.

The new program will cost users $4.50 per year to help the IRS recover maintenance costs, it said.

“With a system in place for the safe electronic delivery of tax transcripts, the mortgage community, and indeed the financial industry as a whole, has a more valuable tool with which to verify income,” said Pete Rose, coalition representative and founding partner of the Franklin Partnership, a Washington, D.C.-based lobbyist firm.