The Income Verification Express Service (IVES) is the program that authorized third parties use to receive a copy of a tax transcript from the IRS. The IRS Inspector General reviewed the tax transcript request process and found that request volumes fluctuate considerably. In FY 2020, there were 12.4 million transcript requests which increased to 15.4 million in FY 2021 and then decreased to 8.3 million in FY 2022.
Section 2201 of the Taxpayer First Act, enacted in 2019, required the IRS to modernize the process of disclosing tax transcripts by January 1, 2023. The cost of this modernization would be paid for through user fees. The Inspector General faulted the IRS for having unduly low user fees for IVES and at the same time failing to modernize the processing of business transcript requests, missing the January 1, 2023, deadline. “Although Information Technology (IT) organization management indicated that this capability was delayed due to technical complexities, we found it was delayed due to a lack of planning by the IT organization.” The IRS now promises it will be implemented by July 2023.
Skepticism of IRS technological aptitude across the tax preparation industry raises issues with the prospect of requiring all transcript requesters to participate in the modernized system. The IRS has yet to make use of the new system mandatory, but promised to do so by January 15, 2025 based on a study they plan on beginning in January 2024. This leaves efaxing as an option for the time being.
The report continued with the Inspector General’s concerns about the sufficiency of signature validation for efaxing: “[T]he IRS has no way of verifying the signature is the true taxpayer before releasing important tax return information.” The report suggested requiring notarization. It was noted in the Inspector General’s report that this problem would not arise if IVES was fully operational and mandatory. It was also suggested that the IRS notify taxpayers when a transcript request form is processed. This would afford taxpayers the opportunity to object to unauthorized requests. The IRS protested that “a secondary confirmation of taxpayer intent” would ruin the goal of processing the requests within 72 hours. The Inspector General, in effect, responded that it was not requesting a secondary confirmation, but a primary confirmation.
Although “IVES employees work 22 hours out of a 24-hour period,” some transcripts have taken more than 7x the anticipated processing time at 22 days. This was the result of intermittent outages of the relevant software, the cause of which took nearly 6 months to diagnose “after a ‘priority one’ ticket was submitted.” “The IRS defines a priority one ticket as any issue causing severe, mission-critical work stoppage. The impact may be on multiple internal or external customers and service to taxpayers. Immediate action is required (i.e., the ticket should be resolved in four hours).”
IVES could be useful to nonlending participants, including attorneys. Although such participants have been admitted to the IVES Program, the IRS expressed concerns that large nonlending participants (such as tax preparation companies) would overwhelm IVES. The administration of the IVES Program requested a policy decision from IRS management for the matter on May 19, 2021. On June 14, 2022, the Inspector General warned the IRS that many applications from nonlending participants have been waiting for over a year. There were 282 such pending applications by July 2022. The IRS promised to make a decision by June 2023.
If you have questions or concerns about how changes to tax reporting systems may affect you or your business, please contact The Burton Law Firm at: 916-822-8700 or email info@lawburton.com for a consultation.
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California has required employers to “indemnify” employees for “necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer” in substantially the same terms since 1937 under Labor Code § 2802.
