When using certain types of income (or loss) to qualify for a loan, federal tax returns (individual and sometimes business) are required as a means of documentation. In all cases, tax returns must be signed by the borrower(s). However, Agencies/investors may sometimes permit the use of tax transcripts in lieu of providing tax returns. However, if both tax returns and tax transcripts are provided, the tax returns must always be signed by the borrower(s).
The requirements for using tax transcripts in lieu of signed tax returns listed below.
Tax transcripts may be used in lieu of signed individual and/or business federal tax returns only if the tax transcripts contain all of the information that would be included in the federal tax returns. This includes all of the information of any applicable Schedule(s) or Form(s) used in qualifying.
In cases where a particular Schedule or Form is required to qualify income (or loss), the tax transcript must provide sufficient detail for that Schedule or Form that would be required to accurately calculate income (or loss). Otherwise, signed tax returns are required.
tax returns are required for LD Advantage loans
The following are examples of Tax Schedules or Forms in which tax transcripts may not provide sufficient detail. These examples are not all-inclusive. If income (or loss) from these Schedules or Forms is utilized, signed tax returns (complete with all pages and schedules) are required.
· Schedule B
· Schedule D
· Schedule E
· Schedule F
· Form 2106
· Business tax returns (all types)
· Schedule K-1
The schedules or forms are not required:
If the income reflected on applicable transcripts is positive, and
If the income supported by that schedule or form is not being used for qualifying
4506T Rejection Notice
Business Tax Returns
Tax Transcript / 4506-T Policy