As a mortgage lender, you are quite familiar with IRS Form 4506. The form, which was brought to prevent fraud, is needed from virtually every borrower to show that their tax returns from the last two years are original and properly filed.
The IRS originally set a March 1, 2022, deadline for compliance with their new 4506-C clean form requirements, but they’ve now extended it to October 1, 2022. Even though lenders now have an extra seven months to comply with the new terms, numerous other important changes on the horizon will create a dramatic shift in how lenders and borrowers deal with and submit tax return verification requests.
Initially, the lender could take 60 days to get the original 4506. This is because the IRS would print and mail the form to the requestor back then. This was inconvenient for both the lender and the borrower to wait for the IRS to send these full-copy tax returns.
The IRS has begun using Optical Character Recognition (OCR) software to move away from human processes and align with the future of automation. To avoid delays, lenders should prepare to alter their internal processes for collecting 4506-C forms from borrowers as part of this transition into the twenty-first century.
The new 4506 process aims to modernize the income verification process, which will benefit both the borrower and the lender. However, there are certain advantages and disadvantages at the start of any learning curve. To read more on the revitalization of the IRS form 4506 and its impacts on lenders, click here.
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