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Taxpayer First Act and Updates to the Use of Tax Return Information

December 5, 2019 BY MQMR Blogger

Question:

How will the December 28th, 2019 effective date of the Taxpayer First Act affect me as a lender or servicer?

 

Answer:

The Taxpayer First Act was signed into law on July 1, 2019 and goes into effect on December 28, 2019. It requires taxpayers to provide consent for the express purpose for which their tax return information will be used.  Additionally, taxpayers must provide their express permission for their tax return information to be shared with any other party.  “Tax return information” is defined under the IRS Code, 26 U.S.C. § 6103.

 

Therefore, if a lender or servicer obtains tax return information during the origination or servicing of a mortgage loan, the lender or servicer must obtain express consent from the taxpayer prior to sharing the tax return information with another party. Such sharing would extend to actual or potential owners of the loan, such as Fannie Mae or any other loan participant.

 

The IRS has indicated that it has no plans at this time to provide a standard form related to disclosing or sharing tax return information with other parties. However, the Mortgage Industry Standards Maintenance Organization (MISMO®) drafted a sample Taxpayer Consent Form designed to allow sellers/servicers to share tax return information with other loan participants. (available to MISMO members). Many document providers have also prepared a consent which will be added to the early disclosures.  Sellers/servicers may also prepare their own taxpayer consent form, as long as the form provides the purpose for which the tax return information will be used and provides the seller/servicer with express permission to share tax return information in accordance with the law