IRS Transcript Policy

Tax Transcripts – Fannie Mae, Freddie Mac, FHA and VA

W-2 or 1099 IRS Transcripts are not required for:

  • Wage-earner borrowers
  • Fixed income (long term disability, social security, retirement, etc.) with alternative documentation such as the award letter, SSA benefits letter, 1099, bank statements.
  • Commission income less than 25% of the borrower’s total earnings

IRS Tax Transcripts are required when qualifying with any of the following:

  • Self-employed income
  • Commission income greater than 25% of the borrower’s total earnings
  • Rental income documented on Schedule E
  • Employed by a family-owned business
  • Fixed income types such as long-term disability, social security, retirement, child support, alimony, etc. when the 1040s are obtained in lieu of alternative documentation.
    Note: Tax transcripts are still required when adjusting nontaxable income to validate the percentage of gross up that was used to qualify.
  • Other income types such as Auto Allowance, Capital Gains/Losses, Dividend/Interest, or Farm Income/Loss
  • Handwritten income documentation
  • Loan files where there is relationship between the Borrower and an interested party of the subject transaction such as Seller, or Loan Officer, or employee of a Mortgage Broker; or Seller has relationship to the Loan Officer.
  • Underwriter’s discretion based on any red flags present in the loan file.

If AUS requires 1040s for any reason, full transcripts would be required. As a reminder, USDA loans still require tax transcripts, regardless of income type.

IRS 4506-T (Rev. 9-2015)

Regardless of the income source(s), each borrower must accurately complete and sign a separate IRS Form 4506-T for each type of transcript at the time of application and at loan closing. For example, one IRS Form 4506-T must be completed and signed for personal returns and another for business returns.

When completing the 4506-T form, please bear in mind some typical IRS Rejection reasons:

  • Borrower’s address is illegible, missing, incomplete, incorrect, or invalid
  • Signature date is missing, expired or invalid
  • Signatory Attestation box not checked
  • Information is altered, incomplete, or illegible
  • Requested tax years are missing or illegible