An outage that crippled the Internal Revenue Service's ability to process 4506-T forms for nearly two weeks has been resolved, but at least one vendor involved in managing the tax transcript requests said the capacity constraints are an ongoing challenge for the mortgage industry.
Cecil Bowman, a former IRS employee who helped develop IVES, said the problem was the result of increased demand on the IRS's Transcript Delivery System ahead of the April 15 deadline for filing tax returns.
"It was a software glitch during the filing season," Bowman, who is now senior vice president of government affairs and industry for National Credit Reporting System, or NCS, an income and identity verification services vendor in Egg Harbor City, N.J.
In the March 16 interview, Bowman added "it might take another day or two," before the verification system is back to a fully operational level.
The IRS did not respond to multiple requests for comment.
The IVES delays began March 2 and resulted in longer than usual turn-times for processing the 4506-T forms. What normally takes the IRS 24 to 48 hours to fulfill one request dragged on for 72 hours or more during the disruption.
The outages are a recurring issue, Bowman said, but what made this incident particularly debilitating was its duration previous disruptions have never gone on for longer than a week.
"You're going to have one or two [outages] a year," he said.
The recent disruption appeared to be resolved on March 13, Bowman said, but NCS is still working through its backlog on a first-come, first-served basis, meaning some lenders may still experience some delays.
Despite Bowman's familiarity with IVES, which he helped develop in 2006, he declined to hazard a specific cause for the outage, saying that it was hard to determine, given the size and complexity of the IRS's information technology infrastructure.
The 4506-T, or "Request for Transcript of Tax Return," is a document that authorizes a lender to obtain official copies of a consumer's past tax returns, W-2 and 1099 records. The documents obtained with a 4506-T are used to verify income during the mortgage underwriting process.
The process for requesting and receiving tax documents is cumbersome, even after the IRS began accepting electronic signatures on the forms in 2013, following a pilot test from 2011 to 2012. That's opened the door for vendors like NCS, Equifax, Veri-Tax and others to provide services that help lenders manage the 4506-T process.
Lenders submit the signed 4506-T form to the vendor, who reviews it for accuracy and completeness. All forms including e-signed versions are faxed to one of five IVES centers located in Austin, Texas; Cincinnati, Ohio; Fresno, Calif.; Kansas City, Mo.; and Ogden, Utah. Once IRS clerks process the forms, the tax records are delivered to the vendor electronically via the Transcript Delivery System, and then passed on to the lender.
In addition to previous outages that have resulted from capacity constraints, IVES was also offline during the 16-day federal government shutdown in October 2013.