From time to time a person is asked to prove his or her income by producing tax returns. This is why tax preparation experts recommend holding on to tax returns for several years. But what if a person doesn’t have copies of his or her returns? Tax transcripts will do.
A tax transcript is essentially an abbreviated copy of your tax return with most of the original information left intact.
Different Types of Transcripts
There are five different types of transcripts you can obtain from the IRS. The most common is the tax return transcript. It shows almost all of the line items from your original tax return. This includes items from any forms and schedules you submitted.
The tax accounts transcript is the second type of transcript. It doesn’t contain all of the information from the tax return in question. It only contains information pertaining to adjustments you made after filing that tax return. If you need all of the information contained in these first two types of transcripts, you can request a record of account transcript instead.
The fourth transcript is the wage and income transcript that contains information on certain forms. Last is the verification of non-filing letter transcript. It proves that no tax return was filed for that tax year.
Reasons for Requesting a Transcript
You might need a text transcript to prove your income in order to buy a home or get a car loan. Small business owners come to mind here. They rely on tax records to prove their income in the absence of documents like W-2 forms and pay statements.
You might also need the information from a tax transcript to complete future tax returns. Perhaps you are facing an audit. A transcript could act as supporting evidence on your behalf. Note that tax transcripts only date back three years.