4506-Transcript form is a way for mortgage lenders to get insurance about the information you provide to them in regards to the previous year’s tax returns. Often the concern is, ‘Will filing the form raise any audit from IRS for previous year’s tax returns?’ Normally filing the form doesn’t trigger an audit but it provides data to the Discriminant Inventory Function System (DIF) for analyzing discrepancies in the previously filed tax return.
Even if the system points back at you, it doesn’t label you as a defaulter right away. It only says that you are either applying for a loan, misplaced some of your old paperwork or may have submitted incomplete information. These should, typically, not raise any red flags with the IRS.
There are a few ways you can go back and check your previous years tax returns before granting permission to the Lender to file 4506-Transcript.
In most cases, the IRS will audit only those taxpayers who have a bigger chance of paying the IRS. The only downfall would be if you have made some errors in your previous tax filings and then sign off for tax transcripts; an erroneous filing could trigger an alert which could lead to an audit.
So, as long as you have been regular with your taxes, a 4506-T will do you no harm.