U.S. Reps. Patrick McHenry (R-NC) and Jimmy Panetta (D-CA) introduced legislation in the House this week that would make changes to the Internal Revenue Service’s (IRS) electronic Income Verification Express Service (IVES) program.
The Income Verification Express Service (IVES) program is used by mortgage lenders and others within the financial community to confirm the income of a borrower during the processing of a loan application. The lawmakers say it is currently overly burdensome for users to navigate. The IRS eIVES Modernization and Anti-Fraud Act of 2023 (H.R. 3335) seeks to improve the program’s performance.
“It is imperative for entrepreneurs trying to grow their businesses and create jobs to have quick and timely access to capital,” McHenry said. “Regrettably, the IRS’ IVES program used by lenders to verify borrower income is overly burdensome and has created unnecessary delays for qualified individuals and small businesses. This bipartisan legislation would help resolve those issues by removing hurdles for consumers, reducing fraud, and increasing access to and the speed at which capital can be secured.”
In this verification process, the IRS provides return transcript, W-2 transcript and 1099 transcript information to a third party with the consent of the taxpayer – a process that takes days to weeks. The Taxpayer First Act of 2019 authorized the IRS to develop an automated system to receive these forms in lieu of the current system, which relies on the forms to be sent to the IRS via secure fax. The IRS was directed to build a near real-time, API-based system that could be used by more financial providers, including small business and others.
In the IRS’ implementation of the eIVES API, the agency decided to assume the responsibility for authenticating a borrower’s identity, which historically has been the responsibility of financial institutions that are already required by federal law to Know Your Customer (KYC).
This bill is designed to significantly reduce friction for borrowers in applying for a loan, reduce fraud, and increase access and speed in which consumers and small businesses can access capital.
“As a member of the Committee on Ways and Means, we worked hard to pass the Taxpayer First Act to modernize the IRS and prioritize American taxpayers. However, the implementation of that law by the IRS is being hindered by burdensome barriers placed on borrowers trying to secure loans,” Panetta said. “Our bipartisan legislation, led by Chairman Patrick McHenry, would ensure that the responsibility of authentication falls on the financial institution rather than the borrower. Such commonsensical laws will uphold the intent the Taxpayer First Act by improving the speed and safety by which consumers and small businesses can access capital.”