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IRS 4506T Form vs Form 4506C: How Mortgage Lenders Verify Income

This guide covers the IRS 4506T Form vs Form 4506C for Mortgage Loans. IRS 4506T Form allows taxpayers to request copies of their federal tax records for a specified period. The IRS keeps several types of records, such as tax return summaries, account information, wage and income details, and confirmation that no return was filed.

If you need tax transcripts, use IRS Form 4506C instead of Form 4506T. This form is used with the IRS Income Verification Express Service (IVES).

When you sign it, you give your lender or approved provider permission to get your tax transcripts for the years you select. This step helps mortgage underwriters check that your income documents match IRS records. Not all lenders require tax transcripts before closing; it depends on the loan program, the type of income documents, and each lender’s policies.

Mortgage lenders require income verification with not just the employer and with requiring income tax returns, but will also need to verify the income and tax returns with the Internal Revenue Service to make sure that the income tax returns are valid. In this guide, we will discuss and cover IRS 4506T Form vs 4506C in mortgage loans.

Does IRS 4506T Form Provide a Full Copy of a Tax Return?

A tax transcript is a summary of a tax return, not the full return or copies of all attachments. A taxpayer who requires a complete tax return would submit Form 4506, not Form 4506T.

Where Does the IRS Send a 4506T Transcript?

Usually, the IRS sends transcripts to the taxpayer’s address on file, as shown on the latest 4506T Form. When lenders want transcripts sent directly to them, they use Form 4506C and the IVES system.

Transcripts allow lenders to compare IRS records with documents provided by the borrower to qualify for a loan.

These May Include:

Personal/Business Tax Returns
W-2 Forms
1099 Forms
Schedule C Income
Partnership Income
S Corporation Income
Rental Income
Commission Income
Bonus Income

Tax transcripts by themselves do not fully confirm a borrower’s income. Lenders must still calculate and verify qualifying income in accordance with the rules of each mortgage program.

Tax Transcripts Aid Verification of Income

Fannie Mae allows lenders to get IRS Tax Transcripts to check certain tax details that help confirm a borrower’s income. If the transcript doesn’t have enough information, extra tax forms or a full tax return might be needed.

Tax Transcripts Aid Detection of Variances in Documentation

Variance May Be Attributed To:

Incorrect Documentation
Amended Returns that are not reported
Delays in Processes at the IRS
Unreported W-2 or 1099 Information
Errors in Name/Social Security Number
Returns that are Undocumented or Unprocessed
Income on Joint Returns that does not belong to the borrower

Differences between documents do not always indicate mortgage fraud. However, underwriters will usually ask for explanations and supporting documents if there are any mismatches.

IRS 4506T Form vs Form 4506C

In this section, we will answer a common question about the difference between IRS 4506T Form and Form 4506C.

What Is Form 4506-T Used For?

IRS 4506T Form is used by taxpayers who want to obtain their tax transcripts or proof that they did not file a tax return.

Following:

Return transcripts
Account transcripts
Records of account
Wage and income transcripts
Verification of non-filing letters

What Is Form 4506C Used For?

Form 4506-C allows approved IVES participants to request specific IRS transcripts. According to the IRS, banks, mortgage lenders, credit unions, and other approved IVES participants can request IRS transcripts using Form 4506-C. Many loan officers, borrowers, real estate agents, and older mortgage articles still refer to tax transcript authorization as IRS 4506T Form. Borrowers should check the form number and ensure all required fields are filled out before signing.

What Is IRS Form 4506?

Form 4506 is a request for a copy of a previously filed tax return. This is different from the IRS Forms 4506T and 4506C, which request transcripts.

What Is Form 4506T-EZ?

Form 4506T-EZ is a shorter version of Form 4506-T used by eligible individual taxpayers asking for a personal tax return transcript. Taxpayers who file returns based on a fiscal year must use Form 4506T.

When Does a Mortgage Lender Require Form 4506-C?

Explain that different loan programs and types of income have different requirements.

A Lender May Request Transcripts When:

Personal tax returns are used to qualify the borrower.
Business tax returns are required.
The borrower is self-employed.
Rental income is used to qualify the borrower.
The borrower receives commission income.
The borrower is a partner or shareholder in a corporate business.
The loan file has inconsistent income documentation.
The underwriter or quality control requires IRS verification.

Form 4506C for Conventional Loans

According to Fannie Mae, Fannie Mae says each borrower whose income is used to qualify for a loan must complete and sign a separate Form 4506C, usually at or before loan closing. This may not be needed if all income has been verified through the Desktop Underwriter service.e earlier statement that all lenders are required to obtain transcripts for every loan applicant.

Lenders May be Required to Obtain Transcripts for the Following:

Form 1040
Schedule C
Form 1065
Form 1120
Form 1120S
Schedule K-1

More than one Form 4506C may be needed because a single form might not cover all personal and business tax returns. Fannie Mae may require separate authorizations for personal and business returns, depending on the validation method, findings, and lender requirements.

When May Tax Transcripts Be Waived Before Closing?

Do not use the title “Exemption to IRS 4506T Form Waiver.” There are no general exceptions just because of Social Security, pension, or other income that is not taxed.

Income is fully confirmed through an automated system
IRS tax returns are not needed to support the income
The mortgage program allows the use of alternate documents
Underwriting findings do not necessitate the transcripts
A non-QM program approves the borrower without tax returns

The lender may still ask the borrower to provide a signed IRS Form 4506, a Verification of Non-Filing letter, or other papers.

W-2-Only Mortgage Qualification

Employees paid by salary or hourly wages may qualify using:

Pay Stubs
W-2s
Verification of Employment
Electronic Income

In these situations, IRS tax returns may not be required.

Non-QM Loans Without Tax Returns

Self-employed borrowers may qualify using:

Bank Statements
1099s
Profit-and-Loss Statements
Asset Depletion
Debt-Service Coverage Ratio

These programs may use different methods to verify income, but lenders must still confirm that the borrower can repay the loan.

How to Complete Form 4506C Correctly

This section gives easy, step-by-step instructions for filling out the form.

Confirm the Taxpayer’s Name and Identification Number

The taxpayer’s name and ID number must match IRS records.
In some situations, the taxpayer must provide a previous name if the most recent tax return was filed under a different name

Enter the Current and Previous Address Accurately

The most common reason an IRS transcript request fails is that the addresses do not match.
The tax return must be filed at the address listed in the prior address section of the form.

Review the IVES Participant and Lender Information

The IVES participant and the client requesting the transcript are identified in Section A of Form 4506C. Do not sign Form 4506C if any fields for the lender, participant, transcript type, or tax year are incomplete. The IRS and Fannie Mae both advise borrowers not to sign an authorization form that is missing information.

Examples:

Form 1040
Form 1065
Form 1120
Form 1120S
W-2
1099

Lenders should request transcripts only for the periods needed for underwriting or quality control.

Sign and Date the Completed Form

If you filed a joint tax return, both spouses need to sign Form 4506C. For Fannie Mae loans, the form stays valid for 120 days after it is signed.

Why Tax Transcript Requests Are Most Likely Denied

Even small differences in names, Social Security numbers, or business names can stop the IRS from processing a transcript request.

Differences from IRS Records

The taxpayer may have relocated after filing the return. The previous address, if applicable, should be stated.

Incorrect Tax Form is Requested

Form 1040 does not provide the lender with a separate business transcript for Form 1120S or Form 1065.

Tax Return is Still Pending Processing

IRS Form 4506 may be unavailable if the return was filed recently.

Tax Transcript Request is Altered, Incomplete, Unsigned, etc.

The IRS requires that Form 4506-C be filled out completely, signed, and dated as instructed.

Lapsed Authorization

If the prior authorization has expired, the lender may require a new authorization based on specific loan requirements.

Impact of Amended Tax Returns on Mortgage Application

The focus of this article is on borrowers amending returns for tax compliance. Do not imply in this section that amending returns for tax compliance to achieve a qualifying income is a common practice.

Tax Return Transcript May Show Return as Initially Filed

IRS tax return transcripts may show the return as filed and do not reflect any subsequent changes. An account transcript and a tax account transcript display information slightly differently after taxes are filed.

Some self-employed mortgage borrowers amend their income tax returns to show more income. They then retract their losses on their tax returns so they can qualify for a mortgage loan.

Borrowers can do so and amend income tax returns and pay additional taxes and retract losses
Just providing amended income tax returns and providing mortgage lender a copy of the canceled check to the Internal Revenue Service is not sufficient
Of course, this will be required
The mortgage lender will also need to get an IRS 4506T Form tax transcripts from the Internal Revenue Service
Unfortunately, the Internal Revenue Service is extremely slow
It can take weeks if not months for the Internal Revenue Service to have the amended income tax returns in their computer system
I had a recent case where the borrower had amended income tax returns and provided me copies of the amended income tax returns as well as canceled checks to the Internal Revenue Service
However, it took over three months for the IRS to have the amended income tax returns and payment in their system and we just got the IRS transcripts

IRS Processing of Amended Returns

Amending a tax return and providing a copy of Form 1040-X does not assure the IRS has finished processing the amendment.

The Underwriter Could Demand:

Amended return
Evidence of filing
Account transcript
Record of account
Taxes paid
Amendment explanation
Updated income
Requirements can vary depending on the loan program and the lender.

Concerns of Amending a Return to Qualify

Documents will be required for the amended return if the income has substantially changed and the amendment has been made close to the mortgage application.
Do not amend a tax return without consulting a qualified tax professional. Loan officers cannot provide tax advice or instruct borrowers on reporting income or expenses.
The tax return documents will be compared to the transcripts.

Discrepancies Could Be:

Adjusted gross income varies.
Transcripts show a missing W-2 or 1099
Business revenue differing
Amended tax return
Joint return income discrepancy
Recently filed return
Inaccurate tax documents
IRS processing issue
The lender may request explanations, corrections, additional transcripts, or updated income calculations.
Discrepancies do not always mean your loan will be denied. In most cases, the lender will ask for more income verification before moving forward.
The authorized company submits a request through IVES, and the IRS states that faxed requests are processed in about 2 to 3 business days, excluding weekends and holidays. Online requests may be faster.

Actual Mortgage Delays May Be Longer Due To:

Inaccurate forms
IRS processing delays
Returns filed recently
Returns filed with amendments
Business transcripts not provided
Vendor delays
Delays due to underwriting
The need for borrower explanations

Can You Get a Mortgage Without Tax Returns?

You may be able to get a mortgage without tax returns, depending on your type of income and the mortgage program you choose. Salaried and hourly employees can sometimes qualify for a mortgage by providing pay stubs, W-2s, and employment verification, as long as tax returns are not required by the program or underwriter.

Self-Employed Borrowers

If self-employed persons are using FHA, VA, USDA, or conventional loans, these loans will require an analysis of the tax returns.

However, the Following Loan Types Do Not Require a Tax Return:

Bank statement loans
1099-only loans
Profit-and-loss-only loans
Asset-depletion loans
DSCR investment-property loans

Borrowers Without Filed Tax Returns

If a borrower was required to file a tax return but has not, that borrower cannot use the income from the returns.

A verification of a non-filing letter shows the IRS has not processed a return for that year. However, it does not prove that the borrower was not required to file or that the income can be used to qualify for a mortgage.

Real Mortgage Example: Self-Employed Borrower with Delayed Income Verification

When using an example to educate, use an example that can be substantiated. A self-employed borrower provided two years of personal and business tax returns. The personal Form 1040 transcript arrived, but the most recent Form 1120S business transcript was missing from the IRS system. Because of this, the underwriter could not finish reviewing the income. The loan team requested the correct business transcript and informed the borrower, which helped avoid a closing delay.

What Does This Example Show?

Business and personal transcripts are separate.
One Form 4506C does not cover all the returns.
Transcripts and tax documents should be reviewed promptly.
It is easier to resolve transcript issues before the borrower faces a tight closing deadline.

Final Thoughts on IRS 4506T Form and Mortgage Income Verification

IRS 4506T Form allows taxpayers to request copies of their federal tax transcripts. However, for mortgages, most lenders use Form 4506C and the IVES system to officially access tax transcripts for income verification. Borrowers should not sign a tax transcript request if it is incomplete.

Before Signing, Ensure the Following are Correct:

The tax requester information is correct.
The lender or IVES participant is identified.
The type of transcript is cited.
The years of the transcript are correct.
All other information on the form is complete.
The form is signed and dated.

Tax transcripts are only one part of mortgage underwriting. Lenders also review your income documents to confirm your income is steady, meets all requirements, and is enough to support your mortgage.

FAQs IRS 4506T Form vs 4506C in Mortgage Loans

Does IRS 4506T Form Impact My Credit?

No. An IRS tax transcript request is not a credit inquiry and does not have a direct impact on your credit.

Can Mortgage Lenders Access All My IRS Information?

No. Form 4506C only allows access to the specific transcript types and tax years listed on the form. Borrowers should check these details carefully before signing. If you do not sign, the lender may not be able to verify your income, which could result in a mortgage denial. The lender will note the reason in your file.

Should I Sign a Blank Form 4506C?

No. The IRS form instructs borrowers not to sign until all lines are filled in. Fannie Mae also advises not to sign until the request is complete.

How Many Years of Tax Transcripts Can Be Requested?

The number of years you need to request depends on your income documents and loan program. Fannie Mae says Form 4506C can be used for up to four tax years. The lender should only request what is necessary for the mortgage review.

What Does “No Record of Return Filed” Mean?

This message may indicate the return was filed with incorrect information, for the wrong year, or with the wrong form. It could also mean the return is still being processed. The borrower should check the filing status and taxpayer information before making a new request.

Can I Get My Tax Transcript Online?

The IRS offers an online account where eligible users. The IRS provides an online account where eligible users can view their tax information. Still, your lender may require you to fill out their version of Form 4506C or another tax verification form.

Is a Tax Transcript the Same as a Tax Return?

A tax return includes the complete filing and all supporting documents. A tax transcript only shows part of the tax filing. To get a full tax return, use IRS Form 4506.

Gustan Cho Associates offers W-2 income only mortgages and bank statement mortgage loans for self-employed borrowers. Please contact us or text us for a faster response at 800-900-8569. Or email us at gcho@gustancho.com. Gustan Cho Associates is a national five-star mortgage company with no lender on government and conventional loans. Gustan Cho Associates is licensed in multiple states. We are experts on non-QM loans and bank statement loans for self-employed borrowers.