Upcoming Important Changes to the IRS 4506-C

24. September 2021 / Uncategorized

Dear valued client,

As you may have heard, The IRS is implementing a processing modernization. This will bring much-needed automation advances to our current manual process, significantly improving our efficiency in response to the industry’s transcript needs.

The first step in this Modernization effort will be the inclusion of Optical Character Recognition (OCR) software. OCR programming will read Form 4506-C as the form was intended. For the clean version of the form to be accepted by the Optical reader, it should:

• Be clear of any editing marks.

• Only identify the transcripts, tax years, and/or taxpayers that need to be processed.

• List the data on the assigned lines.

• Avoid handwriting on the form.


A best practice is to have all borrowers sign a Form 4506-C for tax returns and one for W-2 transcripts.

All participants must adhere to this clean version in completing Form 4506-C to successfully integrate OCR in the IRS Modernization. Please refer to the Form 4506-C’s general instructions to ensure correct form completion.

The IRS is aware that time is needed to update technology and communication within each participant’s organization. The OCR software is expected to go live in October of 2021 and the automation process will work side-by-side with our previous manual processing to start. Submissions received from IRS participants that have not made the adjustment to submitting a clean version of the Form 4506-C requests to integrate with the OCR software by October of 2021, will be routed to the manual processing and will follow that processing timeframe.

Effective January 1, 2022, all clients must have updated their Form 4506-C submissions to match this clean version. This will permit all submissions to be incorporated into the modernization software and phase out the previous manual process. Failure to submit a clean version of the Form 4506-C at this point may result in increased rejections or additional authorized transcript receipts which will incur additional charges.


Thank you,

TaxReturnVerification team at CIC Credit

DOCUMENT LINKS BELOW

Form 4506-C

FORM 4506-C D1C Compatible

FAQ

1. Currently most of the 4506-C forms we receive have all boxes, forms, years filled in and we circle what exactly they are requesting based on the order we receive. Will that need to change?

Yes, this will need to change. Starting in Oct 2021, continuing to submit requests with these deviations will route the request into manual processing as previously. But as of Jan 1, 2022, submitting requests with these deviations will result in either increased rejections or additional authorized transcripts being sent and charged.

2. Will batches sent into the clean form workflow experience a quicker turn-time?

We will closely monitor the manual and automation process to ensure the integrity of the FIFO is maintained. That being said, as more and more clients are able to adhere to the clean form sooner than the required Jan 1, 2022, our processing time will be expected to improve.

3. Should the 4506-C form only be filled out to what specifically is needed as the OCR program will not be able to identify that the circled information is all that we need?

Yes, this is correct. Starting in Oct 2021, continuing to submit requests with these deviations will route the request into manual processing as previously. But as of Jan 1, 2022, submitting requests with these deviations will result in either increased rejections or additional authorized transcripts being sent and charged.

4. Regarding the “editing marks”, what is considered an editing mark?

Currently, some clients notate in the margins which taxpayer, product, or year they are requesting. Continuing to deviate in this manner will route the request into manual processing as of Oct 2021 and effective Jan 1, 2022, submitting requests with these deviations will result in either increased rejections or additional authorized transcripts being sent and charged.

If you have any questions or concerns please reach out to your Account Executive or you may contact the TaxReturnVerification processing department at support@taxreturnverifications.com or call 615-250-2005