What Is The IRS 4506T Form?

IRS 4506T Form

Gustan Cho Associates

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.  The way mortgage lenders verify your income tax returns is by requesting your income tax return transcripts from the IRS through the IRS 4506T form.  The IRS 4506T form will give the mortgage loan borrower to have the mortgage lender request the income tax return transcripts.  The transcripts will math the numbers against the W2s, the 1099’s, and the income tax returns ( IRS FORM 1040 ) that you provide your mortgage loan originator.  The IRS 4506T Form serves as a verification for mortgage loan underwriters to confirm that the mortgage loan borrower’s income tax returns are indeed legitimate and recorded with the Internal Revenue Service.  All mortgage lenders today require confirmation of income tax returns and validation that the income tax returns filed by every mortgage loan applicant via the IRS 4506T Form.

Mortgage And Real Estate Collapse Of 2008

Prior to the mortgage and real estate collapse, most mortgage lenders just required that mortgage loan applicants provide income tax returns and hardly verified it with the Internal Revenue Service.  After the real estate, credit, and mortgage collapse of 2008, hundreds of thousands of foreclosures and bankruptcies sky rocketed in this country.  Thousands of mortgage companies shut down their doors and the whole mortgage industry went through a major over haul including the exclusion of no doc and stated product mortgage loans.  Sub-prime mortgage products, sub-prime mortgage companies, and sub-prime mortgage loan originators went extinct literally overnight.  Part of new mortgage rules and regulations implemented by the government was verification of income tax returns through implementing that the IRS 4506T Form validating every mortgage loan applicant’s tax returns.  Many mortgage loan applicants used to just have their accountants modify their income tax returns and not submit the amendment to the Internal Revenue Service.  This practice went into the mortgage fraud category and now it is a felony to amend income tax returns and claim it as legitimate income without submitting it to the IRS.   If you provide your income tax returns to your mortgage lender and you claim that income as your income, you can bank that it will be confirmed with the Internal Revenue Service.

Exemption To IRS 4506T Form Waiver

There are cases where your mortgage lender will waive the IRS 4506T Form.  In the event if you have non-taxable income such as social security income and/or pension income and you do not file income tax returns,  your mortgage lender will give you a IRS 4506T Form waiver where all you need to show is your social security awards letter.  Also, if you have filed an income tax extension,  a copy of the extension is sufficient in lieu of the IRS 4506T.

Income Tax Amendment

Some self employed mortgage borrowers amend their income tax returns to show more income and retract their losses on their tax returns so they can qualify for a mortgage loan.  You can do so and amend your income tax returns and pay additional taxes and retract your losses.  Just providing your amended income tax returns and providing your mortgage lender a copy of the canceled check to the Internal Revenue Service is not sufficient.  Of course, this will be required but 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 and 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 a mortgage loan applicant 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.

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