Written by Isaac F. Davis

It is common for VA-approved mortgage lenders to use IRS Form 4506-T, Request for Transcript of Tax Return, during the VA home loan underwriting process.  The form’s function is to give lenders authorization to request a potential VA borrower’s tax return transcript. 

An IRS tax return transcript contains useful information that the lender may use to determine a borrower’s ability to pay a VA loan.  The tax return transcript shows a borrower’s financial standing with the IRS.  Information like payment status, any penalties owed, assessments and adjustments after the return was filed will give VA-approved lenders a good feel for a potential borrower’s relationship with the IRS. 

By asking potential VA borrowers to fill out IRS Form 4506-T, lenders will have access to personal or business tax return transcripts for the current year and up to three prior years.  A tax return transcript will also reveal if the borrower did not file a tax return for a certain year. Any accompanying IRS forms like W-2s, 1099s and 1098s, as well as 5498s that may be filed with a tax return will also be available to the lender once a borrower submits a completed IRA Form 4506-T. 

It can be helpful for borrowers to know what is being requested on IRS Form 4506-T which includes:

• Name(s) on return
• Social security number(s)
• Current name and address
• Address used for last return
• Name, address and telephone number of third party (VA-approved lender) that will be receiving transcripts
• Checklist of tax documents requested (most will check all)
• Year-end dates of transcripts requested
• Signature of taxpayer, spouse (if filed jointly), or authorized corporate party
• Date

 

Most potential VA borrowers will likely be able to enter the majority of the requested information after following the instructions provided with the Form 4506-T. 

However, the “checklist” for tax documents may require additional instruction.  By completing this section, a potential VA borrower gives the VA-approved lender access to his or her IRS status of payments, penalties, assessments and adjustments after a return is filed.  It is recommended by most VA lenders to check all boxes so the tax information needed for underwriting is released in its entirety.

Form 4506-T gives lenders access to tax transcripts of only one type of tax return at a time, such as IRS Form 1040 or IRS Form 540. Therefore, if access to more than one type of tax return is needed, then one Form 4506-T must be filled out for each type of return in order for the lender to have access to all the required tax transcripts.  An experienced VA home loan professional will know how to advise potential borrowers regarding this matter.  

For additional information about using IRS Form 4506-T in the VA loan process, contact a VA home loan professional.