topic Re: Income verification in Credit Cards

Income verification

Tomew2000 — Wed, 19 Feb 2020 15:49:06 GMT

My significant other received a Discover Card a few months ago,with a 8500 limit. She used that, and has been making regular on time payments. They contacted her today asking her to sign a 4506 form,so they can verify info on her tax records. Problem is, she hasn't filed 2017 or 2018 yet.
I'm assuming that they'll pull her credit line at that point, and make her pay off the balance. Anyone have any insight as to why they're asking now? How will that affect her credit? if anyone knows if that will raise any red flags at the IRS, I'd appreaciate it

Re: Income verification

Anonymous — Wed, 19 Feb 2020 16:25:42 GMT

Unfortunately she's not alone.

https://ficoforums.myfico.com/t5/Credit-Card-Applications/DISCOVER-FORM-4506-T/m-p/5645421

If she hasn't filed taxes, they will close her card. It's not clear why they've been doing this.

As for impact, it depends on how the closed card is reported but it's a good idea to pay it off ASAP.

Re: Income verification

Remedios — Wed, 19 Feb 2020 16:31:33 GMT

@Tomew2000 wrote:
My significant other received a Discover Card a few months ago,with a 8500 limit. She used that, and has been making regular on time payments. They contacted her today asking her to sign a 4506 form,so they can verify info on her tax records. Problem is, she hasn't filed 2017 or 2018 yet.
I'm assuming that they'll pull her credit line at that point, and make her pay off the balance. Anyone have any insight as to why they're asking now? How will that affect her credit? if anyone knows if that will raise any red flags at the IRS, I'd appreaciate it

If she hasn't filed taxes, what did she put on her application?

They specifically ask for source of income.

Re: Income verification

Anonymous — Wed, 19 Feb 2020 16:34:23 GMT

Banks can ask for these for a variety of reasons. There are movements recently in cutting CLs, closing accounts, asking for 4506s from multiple large lenders. Although hard to guess the motives individually, collectively, I tend to think there are some undercurrents in global economics that is driving banks to be more cautious.

At this point, I would suggest adding her to some of your cards as AU and open some cards in her own name just to maintain some sort of reasonable UTIs.

Re: Income verification

Revelate — Wed, 19 Feb 2020 16:47:23 GMT

@Remedios wrote:
@Tomew2000 wrote:
My significant other received a Discover Card a few months ago,with a 8500 limit. She used that, and has been making regular on time payments. They contacted her today asking her to sign a 4506 form,so they can verify info on her tax records. Problem is, she hasn't filed 2017 or 2018 yet.
I'm assuming that they'll pull her credit line at that point, and make her pay off the balance. Anyone have any insight as to why they're asking now? How will that affect her credit? if anyone knows if that will raise any red flags at the IRS, I'd appreaciate it
If she hasn't filed taxes, what did she put on her application?
They specifically ask for source of income.

You basically have 3 years to file taxes though there's of course restrictions and some penalties there like anything but the IRS isn't going to come looking for a pound of your flesh until after that point.

Basically you can amend your taxes for 3 years after the original filing date and as such no harm no foul as long as you make it right by that point. If you haven't filed your taxes by then, double bonus round where the IRS files a Substitute For Return (SFR) and trust me, nobody wants that in their lives.

I lost a F'n decade financially because of that, dumb dumb dumb dumb dumb dumb dumb dumb....

Re: Income verification

kerplunk — Wed, 19 Feb 2020 16:54:12 GMT

I imagine that someone who hasn't filed or paid their taxes in three years would already be red-flagged by the IRS.

As for Discover, just maxing the credit limit may have triggered this account review.

Re: Income verification

steelers1 — Wed, 19 Feb 2020 17:10:22 GMT

@Tomew2000 wrote:
My significant other received a Discover Card a few months ago,with a 8500 limit. She used that, and has been making regular on time payments. They contacted her today asking her to sign a 4506 form,so they can verify info on her tax records. Problem is, she hasn't filed 2017 or 2018 yet.
I'm assuming that they'll pull her credit line at that point, and make her pay off the balance. Anyone have any insight as to why they're asking now? How will that affect her credit? if anyone knows if that will raise any red flags at the IRS, I'd appreaciate it

She needs to file her taxes. I know that's not what your asking however her Discover issue is miniscule compared to an IRS issue.

As far as Discover goes they will shut her down. Once her tax filing is caught up then she can always reapply.

Re: Income verification

thornback — Wed, 19 Feb 2020 17:21:55 GMT

@kerplunk wrote:
I imagine that someone who hasn't filed or paid their taxes in three years would already be red-flagged by the IRS.

Not if you file simple taxes and are due a refund. You can go without filing for 3 years in those cases. Many single filers with no property ownership can do this without penalty - and many do. IRS knows whether or not you owe because they receive their own copies of tax docs/taxable income.

With Disco - they will close her account because they want the most recent year's return and will not accept any other form of verification - like pay stubs. Though the account will be in good standing, it will be notated as "closed by credit grantor".

However, she can close it before they do (before the 5 day period to grant access expires), in which case, the account will be noted as "closed at consumers request".

Either way, once the account is closed, she'll regain access to the account online for the next 12 months and will be able to continue making payments during that time. However, the account will close with a balance which will temporarily affect her scores - so if she can PIF, that'd be best.

Sorry OP.

Re: Income verification

K-in-Boston — Wed, 19 Feb 2020 17:23:53 GMT

@Tomew2000 wrote:
My significant other received a Discover Card a few months ago,with a 8500 limit. She used that, and has been making regular on time payments. They contacted her today asking her to sign a 4506 form,so they can verify info on her tax records. Problem is, she hasn't filed 2017 or 2018 yet.
I'm assuming that they'll pull her credit line at that point, and make her pay off the balance. Anyone have any insight as to why they're asking now? How will that affect her credit? if anyone knows if that will raise any red flags at the IRS, I'd appreaciate it

As others have stated, without them receiving tax transcripts the account will likely be closed. Since there is no 2007 or 2008 data, I wouldn't even bother to submit the form. There shouldn't be any new red flags raised with the IRS; they would simply not be able to supply the transcripts for 2007 and 2008 because they do not have them. As for how it will affect her credit, Discover generally reports closed accounts with balances with the original credit limit, so it would be treated the same for scoring as an account that is still open. Once it's paid off, there would be no harmful effects unless it caused overall utilization to go out of whack, or other scoring factors like credit mix if there are no other revolving cards open.

If taxes are owed for 2017 and 2018, it's of course in her best interest to get those filed and either paid or set up with a payment plan ASAP as they are still accruing fees and penalties. If there's a refund involved, it's getting smaller every day.

Re: Income verification

kerplunk — Wed, 19 Feb 2020 17:34:05 GMT

*** I'm on my phone (mobile version of this forum website) and the quotations were off when I responded about amending the tax returns. Please disregard my posts.

Re: Income verification

K-in-Boston — Wed, 19 Feb 2020 17:36:38 GMT

I've removed some posts that were bordering on not being Friendly, Supportive, and Respectful, and the post that began that conversation. To clear up any confusion, at no time did the OP state that their SO filed fraudulent tax returns or planned to amend them later, only that she never filed them at all for these two tax years.

Re: Income verification

Anonymous — Wed, 19 Feb 2020 17:38:32 GMT

There could be a hord of possible legit reasons for not having a tax records for the last few years. At this point, guessing why and assuming we know why, is not useful. We should just let it go until and unless OP is willing to disclose.

Re: Income verification

stonedog23 — Wed, 19 Feb 2020 17:55:03 GMT

@Remedios wrote:
@Tomew2000 wrote:
My significant other received a Discover Card a few months ago,with a 8500 limit. She used that, and has been making regular on time payments. They contacted her today asking her to sign a 4506 form,so they can verify info on her tax records. Problem is, she hasn't filed 2017 or 2018 yet.
I'm assuming that they'll pull her credit line at that point, and make her pay off the balance. Anyone have any insight as to why they're asking now? How will that affect her credit? if anyone knows if that will raise any red flags at the IRS, I'd appreaciate it
If she hasn't filed taxes, what did she put on her application?
They specifically ask for source of income.

Filing taxes and having an income are two different things. How much time is Discover giving your SO to provide the form?

Re: Income verification

Tomew2000 — Wed, 19 Feb 2020 17:54:19 GMT

Hey all

Thanks for the good feedback Just to be clear, there’s no false income reporting. My question was really on the Credit side, and the tax question was a sidebar.

Re: Income verification

thornback — Wed, 19 Feb 2020 18:03:17 GMT

@Tomew2000 wrote:
Hey all
Thanks for the good feedback Just to be clear, there’s no false income reporting. My question was really on the Credit side, and the tax question was a sidebar.

Disco requested the same from me after a full year of having the card and PIFing each month. I declined to oblige (too much personal info for a credit card AND they use Equifax - of all reckless entities - as the 3rd party to obtain the docs so that made me uncomfortable) - so i closed my account with them. I had already paid my balance in full so that was of no concern - all i lost was a healthy credit limit. The sky didn't fall.

Re: Income verification

Remedios — Wed, 19 Feb 2020 18:30:03 GMT

@stonedog23 wrote:
@Remedios wrote:
@Tomew2000 wrote:
My significant other received a Discover Card a few months ago,with a 8500 limit. She used that, and has been making regular on time payments. They contacted her today asking her to sign a 4506 form,so they can verify info on her tax records. Problem is, she hasn't filed 2017 or 2018 yet.
I'm assuming that they'll pull her credit line at that point, and make her pay off the balance. Anyone have any insight as to why they're asking now? How will that affect her credit? if anyone knows if that will raise any red flags at the IRS, I'd appreaciate it
If she hasn't filed taxes, what did she put on her application?
They specifically ask for source of income.
Filing taxes and having an income are two different things. How much time is Discover giving your SO to provide the form?

Thank you for clarifying that for me 😐

With that said, Discover will only accept tax returns as proof of income, so while they are two different things, one is used to address the other.

Re: Income verification

Remedios — Wed, 19 Feb 2020 18:36:52 GMT

OP has indicated tax returns are not what they want to discuss and wont be providing so there no need to further address that issue.

@Tomew2000 if you're wondering about scoring impact, it depends on her utilization.

If it remains unchanged, there should be very little impact.

If you wish to further discuss scoring impact, you can start a thread in scoring subforum, but you will need to provide more data about her profile.

Re: Income verification

SarahJo — Wed, 19 Feb 2020 18:39:01 GMT

It will most likely be closed if the information isn't submitted...but I wonder if they will just balance chase her until the balance is paid off and then close, end result is the same however.

With no lates and the balance paid in full the account will appear in good standing and simply closed on the CR. Thornback's suggestion of paying off and closing is a good one if possible and would not put you in financial trouble otherwise.

I have more than once said a "no, thank you," to providing more than minimal financial information. I do understand and respect the bottom line for lenders, but I also understand and respect that I still have a right to privacy in certain matters as well. Please update and good luck!

Re: Income verification

Anonymous — Wed, 19 Feb 2020 18:38:26 GMT

@thornback wrote:
@kerplunk wrote:
I imagine that someone who hasn't filed or paid their taxes in three years would already be red-flagged by the IRS.
Not if you file simple taxes and are due a refund. You can go without filing for 3 years in those cases. Many single filers with no property ownership can do this without penalty - and many do. IRS knows whether or not you owe because they receive their own copies of tax docs/taxable income.

Which would in itself be motivation to file, yes? IMO, whether you owe or are due a refund it's best to file annually. And if you owe, earlier the better to avoid fees.

As per this issue, it seems one should definitely file every year for POI purposes. At least until they loosen up to accept pay stubs as POI.

Re: Income verification

Tomew2000 — Wed, 19 Feb 2020 18:42:31 GMT

They said 14 days. She’s doing her taxes next week, but the timing probably won’t work