Verifying borrowers’ income is a critical step in the mortgage lending process. Tax transcripts confirm that your applicants’ stated income matches official IRS records. In turn, they protect you from fraud, strengthen your regulatory compliance, and reduce your repurchase risk.
While essential, accessing tax transcripts hasn’t always been easy. The IRS is often understaffed and relies on dated technology, making its traditional tax retrieval methods slow and error-prone. As borrowers increasingly expect swift service and digitized processes, many lenders are exploring more efficient alternatives.
In this article, we’ll compare two popular tax transcript options—Form 4506-C vs. Form 8821—and outline their pros and cons. After that, we’ll explore how innovative solutions, like Certified Credit’s Tax Wallet Powered by Halcyon, are transforming tax transcript retrieval, providing lenders with a faster, more affordable way to verify borrowers’ income.
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Form 4506-C vs. Form 8821: What’s the Difference?
As of 2025, lenders primarily rely on two methods to retrieve borrower tax transcripts: IRS Form 4506-C and IRS Form 8821. While both serve similar purposes, they differ in terms of their processes, fees, information, and borrower experience.
What is IRS Form 4506-C?
IRS Form 4506-C authorizes you to request tax return transcripts directly from the IRS. It’s used in conjunction with the IRS’s Income Verification Express Service (IVES). For decades, it’s been the industry standard for verifying borrower income and detecting fraud in mortgage transactions.
Here’s how it works:
- Your borrower fills out and physically signs Form 4506-C (e-signatures aren’t permitted).
- You submit this form to the IRS through the e-File system and pay the required fees.
- The IRS processes your request and verifies the information.
- If approved, the IRS will share the verified tax transcripts with you.
While Form 4506-C has been the default solution for several decades, it’s not without its challenges. Some downsides of this tax retrieval method include:
- Sluggish turnaround times – Processing Form 4506-C can take between one to two weeks, on average. If the IRS is experiencing delays, it can take even longer, potentially putting your borrowers’ closing timeline at risk.
- High rejection rates – The IRS rejects up to 40% of Form 4506-C submissions. These rejections are often due to minor inconsistencies, like typos or discrepancies between borrowers’ names and IRS records. Unfortunately, the IRS doesn’t explain the reasons behind their rejections, nor do they provide guidance on how to resolve them. As a result, you’ll need to identify and correct the discrepancies on your own before re-submitting.
- Manual processes – Form 4506-C requires wet signatures and manual handling, which slows down processing times and increases the risk of data entry errors.
- Costly, recurring fees – Form 4506-C submission fees can exceed $40 per request. If you’re working with multiple borrowers or ordering tax transcripts for several years, these fees can really add up.
Despite these drawbacks, the 4506-C form remains a staple in mortgage lending because it’s a well-established, compliant method of obtaining tax return transcripts.
What is IRS Form 8821?
IRS Form 8821, also known as the Tax Information Authorization, allows you to access a borrower’s tax information directly from the IRS. Unlike Form 4506-C, which only permits a one-time request for tax return transcripts, Form 8821 provides ongoing access to a borrower’s tax records for a specified timeframe.
The duration of authorized access can last up to three years and covers multiple types of tax returns, including forms:
- 1120
- 1120-S
- 1065
- 1040
- 940
- 941
While Form 8821 can authorize access for several years, borrowers can revoke access at any time by notifying the IRS in writing.
Benefits of Embracing Form 8821
Some key benefits of the Form 8821 process include:
- Fast turnaround times – Thanks to Form 8821’s use of digital consent and its direct connection to the IRS, it often completes transcript retrievals in a matter of minutes.
- Reliable accuracy – Form 8821’s digitized authorization reduces the risk of data entry errors and discrepancy-related rejections.
- Ongoing access – With Form 8821, you can continue accessing borrowers’ tax transcripts post-closing without going through the cost and hassle of requesting additional signatures.
- Broader insights – Beyond tax return transcripts, 8821 also enables you to access borrowers’ IRS payment history, filing compliance, and other key data. What’s more, it can shed light on hidden tax debts that the IRS has yet to file as public tax liens.
- Digital experience – Borrowers can digitally authorize access to their IRS data through secure platforms like ID.me, allowing for a more convenient experience.
Put simply, Form 8821’s modernized approach enhances efficiency and offers you access to more comprehensive data, facilitating better decision-making and faster loan closings.
Read More: Keeping Costs Down Despite Rising Origination Costs in 2025
Which Tax Transcript Option Should You Choose: Form 4506-C or Form 8821?
The right choice between Form 4506-C and Form 8821 ultimately depends on your needs, goals, and desired borrower experience.
Form 4506-C remains a viable option for lenders who:
- Need a one-time transcript retrieval for specific tax years.
- Aren’t interested in ongoing monitoring.
- Prefer the familiarity and regulatory clarity of an established process.
Meanwhile, Form 8821 may offer more value to lenders who desire:
- Rapid turnaround times
- Shorter loan cycles
- Reduced costs
- Post-closing tax access
Enjoy Access to Both Tax Retrieval Options With Certified Credit
At Certified Credit, we understand that Form 4506-C and Form 8821 both have advantages and limitations. That’s why we carry both solutions for our clients.
Whether you’re sticking with tried-and-true processes or open to adopting new technologies, our fraud and risk mitigation tools are designed to:
- Integrate with your loan origination system (LOS) – Our tools seamlessly connect to Encompass, Byte, Meridian Link Mortgage, Empower, and other leading platforms.
- Support investor compliance – Both of our tax retrieval options meet Fannie Mae, Freddie Mac, and FHA guidelines, so you can sell your loans on the secondary market with confidence.
- Provide reliable data – With our robust solutions, you can ensure greater data accuracy, integrity, and quality control.
Read More: 9 Tools Every Mortgage Lender Should Be Using in 2025
Introducing Tax Wallet Powered by Halcyon: A Smarter Way to Retrieve Tax Transcripts
Motivated by our commitment to help lenders maximize efficiency, reduce costs, and improve their borrower experience, we recently added a new solution to our suite: Tax Wallet Powered by Halcyon. Tax Wallet combines the convenience of Form 8821 with Halcyon’s cutting-edge fin-tech platform to deliver fast, accurate tax transcript retrievals.
This solution allows borrowers to choose from one of these two authorization options:
- Digital consent via ID.me – ID.me is a popular digital identity verification service used by over 140 million consumers. It allows borrowers to share near-instant transcript access, often providing results in minutes.
- Transcript authorization form – This option allows borrowers to authorize tax transcript retrieval through a paper form, offering a non-digital alternative for those who prefer a more traditional approach.
Once your borrower has completed this authorization, you can access their comprehensive tax transcripts and IRS data through a secure, user-friendly interface.
8 Benefits of Tax Wallet
When you start using Tax Wallet, you’ll enjoy the following benefits:
- Shorter loan processing times – Tax Wallet has the potential to help you close loans up to 70% faster, slashing your processing times from weeks to days.
- Lower costs – This affordable solution provides tax verifications for approximately 25% less than Form 4506-C, allowing you to save money while maintaining loan quality.
- All-inclusive pricing – Unlike Form 4506-C, Tax Wallet won’t charge extra fees for multiple borrowers, tax years, or error corrections.
- Post-closing transcript access –Tax Wallet eliminates the need to request additional borrower signatures after closing for up to three years.
- Convenient integrations – Tax Wallet integrates seamlessly with several LOS platforms, including Encompass, Byte, Meridian Link Mortgage, and Empower. You can also use its API with your income calculation tools.
- Multiple formats – Tax Wallet gives you the flexibility to receive your transcripts in PDF or JSON form, eliminating the need for optical character recognition (OCR) or manual intervention.
- Rep & Warranty Protection – Tax Wallet offers Rep & Warranty indemnification through Fannie Mae and Freddie Mac, safeguarding your eligible loans from costly repurchase risks.
- Flexible borrower experience – Lastly, Tax Wallet gives your borrowers the freedom to choose their preferred authorization method, whether that’s a seamless digital process or a traditional, paper-based approach.
Read More: 5 Steps to Take Control of Your Borrower Experience
Modernize Your Tax Transcript Retrieval with Certified Credit
In 2025, tax transcripts are still an essential component of the mortgage lending process. If you’re tired of 4506-C retrievals slowing you down, consider adopting an 8821-based solution, like Tax Wallet powered by Halcyon.
Whether you prefer the familiarity of Form 4506-C or are ready to embrace 8821 and Tax Wallet, our flexible solutions can integrate seamlessly into your existing workflows. Along with these two tools, we also offer:
- Customizable credit reports
- Credit score improvement tools
- Automated prequalification
- Automated verification of income and employment (VOE)
- Automated credit supplements
- Undisclosed debt monitoring
- Property and valuation support
- Comprehensive fraud reports
- Underwriting compliance
- Settlement services
Ready to see how our savvy solutions can accelerate your lending process, lower your costs, and help you close more loans? Schedule a consultation with Certified Credit today!
Sources:
USA Today. Could IRS layoffs affect your 2025 tax refund? How to check refund status, schedule.
https://www.usatoday.com/story/money/2025/02/19/irs-layoffs-2025-tax-refund/79229455007/
IRS. Income Verification Express Service.
https://www.irs.gov/individuals/income-verification-express-service
Legacy Tax & Resolution Services. Why SBA Lenders Should Use Form 8821 instead of Form 4506-C.
IRS. About Form 8821, Tax Information Authorization.
https://www.irs.gov/forms-pubs/about-form-8821
ID.me. About Us.
