When you apply for a loan from a bank, you should expect them to ask you for verification of your income. Before the economic crash of 2008, it was easy to get a loan simply by self-certifying your income. Those days are long gone, and every bank is required to get verified income information from their loan applicants.
You will be asked for copies of your paystubs and W-2s. Sometimes banks will ask for a copy of your tax returns, especially if you’re self-employed. To ensure that all of your information is correct your loan underwriter may further request a copy of your tax records. This is perfectly normal, so don’t panic if you are asked to provide this.
Banks need to cross-check certain information on your application and W-2s, and they can do this by looking at your tax transcripts. If everything matches up, then the loan process will move forward. If not, the loan officer will ask you more questions about any discrepancies. Self-employment income is almost always a trigger for tax record requests, so don’t be surprised if this happens to you as a business owner.
You’ll need to fill out form 4506-T from the Internal Revenue Service (IRS) to release your tax transcripts to the bank. Your tax transcripts is a verified method to show what your income was for a specific year. It comes directly from the IRS, so there’s no question that it’s true information.
Make sure to enter the bank’s address and not yours on the form, so that it’s sent directly to the loan officer. Make sure to sign it and request the right year that the bank is asking for. The tax transcripts are available back to three years. In case you didn’t file a return, the transcript will provide this information too.