An Indepth Look At The Tax Transcripts & 4506-Ts


Lenders have begun experiencing difficulty in regards to obtaining tax information from the IRS. Initially the IRS blamed the slow transcript turn times on budget cuts. The IRS believes that their computers are running slower even as employees get paid less. It is true that the IRS is experiencing a lack of funding and difficult decisions are being made as a result of this.

Freddie Mac responded to some issues where requests submitted through IRS Form 4506-T, request for transcript of tax return are getting returned with a code of limitations. This code will guard against identity fraud and keep criminals from getting unauthorized access to taxpayer information. IRS form 4506-T is structured to point out a borrower’s income or their Social Security number. You can guard against fraud by looking at the single family mortgage fraud best practices document.

Fannie Mae does not require tax transcripts. All lenders must obtain a completed and signed IRS Form 4506-T during the underwriting process. Lenders can submit borrower income. The IRS has made policy changes, which means that third party requests for IRS transcripts may be rejected or blocked.

Delays in getting IRS transcripts has caused some mortgage companies to give temporary guidance to meet any underwriting requirements. Penny Mac is working with USDA Rural Housing’s Single Family Housing origination update to look at tax transcript rejections from the IRS.

Envoy Mortgage has announced that 1040 tax transcripts will no longer be required. The IRS is denying requested tax transcripts. The IRS will mail a notification to the borrower talking about the situation. The IRS won’t give the tax transcripts directly to the lender, they will have to get them from the IRS. The IRS application called Get Transcript has been temporarily closed because people can receive access to personal tax payer information.

New economic data is showing increased momentum in regards to the US economy.

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Can A Mortgage Lender Request Prior Tax Returns?

arizona-fha-mortgage-lender-phoenixOne of the most time-consuming aspects of the mortgage application process is gathering together all of the paperwork your mortgage lender requires. Included in the many items that lenders commonly request are prior years’ tax returns. It is common for lenders to ask to see the last two or three years of personal tax returns as well as business or partnership tax returns if they are applicable to you. With a closer look at why lenders ask for these documents, you will see why they are important to your loan application process.

Your Sources of Income
One of the first things your lender will look for when reviewing previous years’ tax returns is your sources of income and what those income amounts are. They essentially are used to verify the information you provided on your loan application. Everything from your W-2 income to self-employed income, rental income and more may be reviewed.

Your Deductions
Many people claim numerous deductions on their personal tax returns, and some of these deductions can be eye-opening to a lender. For example, if you claimed a considerably high deduction for uniforms and other work-related expenses, the lender may require an explanation regarding this to determine if this is an on-going expense that needs to be included in your net income calculation.

Other Information
There are other details listed on a tax return that may be important as well. For example, the payment or receipt of alimony or child support are typically found on tax returns as are your number of dependents. This is information that may have also been included on your loan application and that can be verified through a tax return.

While it can be burdensome to provide a mortgage lender with so much information, you can see that there are legitimate reasons why the lender is asking for your tax returns. Providing all information as soon as possible can help to facilitate the loan process.

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Why New Home Buyers Should Keep Track Of Their 4506-T

first-time-homebuyers1The mortgage market has fraudulent activities. So, lenders want to protect themselves against unscrupulous borrowers. The IRS Form 4506 T gives loan officers permission to get your IRS transcripts. The transcripts show various years of your federal income tax filing.

You do not have a choice when presented with Form 4506 T. All borrowers have to sign it to give the lender permission to look over past tax filings. The information you put in your application has to agree with the Form 4506 T. If not, your loan may take longer to process.

The form is not a new procedure. The IRS has been disclosing information about lenders over the years. But, they only did so at the close of escrow for self-employed individuals with gaps in income. The new rules affect all borrowers per Fannie Mae.

Fannie Mae asks lenders to get two sets of electronic transcripts from all borrowers. A Form 4506 T has to be present during the application process and also at the time of closing. Borrowers also have to show proof of employment. The forms the lenders get when asking for Form 4506 T includes 1040, 1040A or 1040EZ. Other types include W2, 1098s, and 1099s.

Borrowers have it much harder to get a loan because of the new rules. Apart from the tax returns, lenders may ask for specific tax tables. The schedules include B through F, Schedule K-1, Form 2106, or business forms. That is why it is important to keep track of Form 4506 T.

Self-employed individuals have to jump through more hurdles. The number of years to show proof is up to four. So, they have to show proof of personal income tax returns and business tax returns. They have to file separate transcripts for each return. The lender would send two Form 4506 Transcripts. One transcript is for the personal income tax, and the other is the business tax return.

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3 Tips for 4506-T Quality Control

getloans-mortgage-delayed-tax-history-form-4506-300x223The 4506-T is an IRS form that authorizes lenders to obtain your recent tax transcripts. This is a way for the creditor to verify your income, deduction claims, and any owed taxes showing on your return. The form must be filled out in a very specific way or it will be rejected, potentially adding days or weeks to your loan process! Use the following tips to make sure your form gets through on the first try.

1. Request Help From the Lender

Your lender should be able to fill out all portions of the form except your signature based on information you provided on the loan application. If they don’t do this automatically, ask if they can fill out at least Lines 6 through 9, as they may need to complete the form in a specific way that a layperson wouldn’t easily identify.

2. Handwriting

Ensure the only handwriting on the form is your signature at the bottom. This can be easily done by using a fillable 4506-T Form, which can be downloaded from the IRS website here. If you are signing a form that your lender provided to you, review the information they entered for any inaccuracies, and have them fix it if something is wrong – writing in or crossing out information by hand will invalidate the form and you’ll have to do it over again anyway.

3. Current and Previous Address

If you have moved in the last couple years, double check that you are giving the lender enough information to fill out the form. If you’ve moved in the last year, Line 3 and 4 will be different. Review those items to make sure they reflect the address you used when filing your tax returns for the most recent two years. It’s also crucial to check for typos or spelling errors in the addresses as written, as any mistake will result in the IRS system rejecting the form.

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8 Business Financials To Check Before Getting A Small Business Loan


You can greatly improve your odds of successfully financing your business and getting a good start by understanding your options and needs when it comes to financing your business. Consider the following 8 factors to help you start, grow, and manage your business.

Startup Costs (Estimation)
Determining your budgetary needs is a critical step in the planning process of starting a business. You can determine how much seed money you need to start by estimating the costs of doing business for the first months.

Personal Finances
Your personal finances can experience tremendous strain when you start a business. Start by setting a monthly household budget that accounts for your household expenses and your income. Also be sure to check your personal credit history because lenders and suppliers will use this to determine your terms of credit.

Fiscal Fitness
Determine whether your business is fiscally fit. There are various resources available such as Money Smart For Small Business (MSSB).

Financial Statements
Financial statements can be used as a roadmap to steer your business in the right direction and help you avoid costly breakdowns. Understanding these statements is very important for the success of a small business.

Cash Flow Analysis
When it comes to small businesses, cash is king. It’s a necessity for the starting and operating as well as expansion of the business. Determine the amount of cash you need to do these things.

Breakeven Analysis
It’s also important to determine when your business will break even and begin to make a profit. This is where the identification of your startup costs comes into play. The costs will help you determine the sales revenue needed to pay ongoing expenses.

Borrowing For Your Business
Although borrowing to fund a business is common, obtaining a loan isn’t always easy. Before approaching a lender, you need to understand the factors considered in the evaluation of your loan application.

SBA Financial Assistance Eligibity
Learn the requirements for seeking SBA financial assistance, as this can be a valuable resource.

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