Buying a home involves a lot of paperwork, and the most important pieces of paperwork are tax returns. Mortgage companies use to allow home buyers to state their income without any documentation, which led to the housing market crash in 2008. Now, whenever someone is purchasing a home and applying for a mortgage, they must provide the mortgage company with several years of their tax returns to prove their income. Many people keep hard copies of their tax returns at home, but if these copies are not available, the home buyer can fill out IRS Form 4506 to request copies of their tax returns.
Two forms are used to request taxes. IRS Form 4506 is used to request copies of tax returns or to allow a third party to receive copies of a person’s tax returns. These copies include every filed tax document, and copies are available for the current tax year and the previous six years. Some people may confuse Form 4506 with Form 4506-T, but Form 4506-T only allows the recipient to receive a transcript of the tax returns. These transcripts do not present all the lines in the tax return, and they do not reflect any changes to the tax return after it was filed. Transcripts are available for the current year and the previous three years.
A lender needs to see the home buyers entire tax return to make an accurate lending decision. The home buyer should only request copies of tax returns for the years the lender asks for, and this request should occur within 60 days of signing a mortgage. It cost $50 to process each tax return copy, and a lender will typically add this fee into the loan. Since taxes contain important confidential information, be sure to know who is using these tax documents and why they need them to prevent any abuses.