Every individual dreams of buying a house, but with it comes many responsibilities and hassles. One of the major factors to avoid is delaying the closing of a deal. Most homeowners are unaware that a small mistake on their part can cause a lot of delay from the IRS.
According to changes in the law, every mortgage lender has to obtain a buyer’s federal tax return transcripts for the past two years, before proceeding with a deal. These transcripts can be obtained only with a 4506-T form, signed by the buyer/homeowner. Only a ‘Clear’ result from the IRS gives the mortgage lender the green signal to move forward with the loan process. There are many cases that ‘Fail’ after the scrutiny of the IRS and statistics show that 80% of these failures are due to wrong/mismatched addresses. Even a trivial missed out ‘N’ or ‘NW’ after the name of a road can result in a rejection. The remaining percentage of failures are caused by reasons such as: the borrower not filing a federal tax return, discrepancy in the tax returns filed and those provided to the lender, and discrepancy in the income provided to the lender and the IRS.
As with any important form, the 4506-T also needs to be filled with utmost care. Let’s recap the main points mentioned In How to Avoid Rejections on a 4506-Transcripts Form:
- Make sure that all the data, including your signature is legible.
- Do not use a whitener to correct mistakes in a hand-written form; always start fresh. The IRS rejects forms with such corrections.
- The 4506-T form should not lose its original size upon scanning and the form must be submitted in the portrait layout, not in landscape.
- Ensure that the primary taxpayer’s name is entered correctly. If it is a joint return, both partners must sign and date the form.
- Make sure that the address on the form matches with the address on the tax return for the requested year.
Also, it is always advisable to approach a professional agency like us for faster processing and avoidance of rejections.