Business Tax Returns

Overview

When business tax returns are required for any loan program, the most recent year’s business tax returns must be obtained (the most recent 2 year’s business tax returns may be required depending on AUS findings).  Below is an outline detailing the allowable age of business tax returns as well as the documentation requirements.

Definition

The “most recent year’s” business tax return is defined as the last return scheduled to have been filed with the IRS.  Below are examples as it pertains to Form 1120 and 1120S only.

If Today’s Date is….

Then the Most Recent Year’s Tax Return would be…

February 15, 2016

2014

March 15, 2016

2015

December 15, 2016

2015

March 15, 2017

2016

 

For Form 1120 and 1120S only, the following table describes which business tax returns related documentation is required depending on the application date and disbursement date of the loan. 

 

Application Date

Disbursement Date

Documentation Required

September 15, [current year minus 1] to March 14, current year

 

 

September 15, [current year minus 1] to March 14, current year

The most recent year’s business tax return is required.  The use of a Tax Extension (IRS Form 7004) is not permitted.

March 15, current year to June 30, current year

The previous year’s business tax return (the return due in April of the current year) is recommended, but not required. 

We must ask the borrower whether he/she has completed and filed his/her return with the IRS for the previous year. If the answer is yes, the lender must obtain copies of that return. If the answer is no, the lender must obtain copies of business tax returns for prior two years.

 

July 1, current year to September 14, current year

We must obtain

·         the most recent year’s business tax return, OR all of the following:

·         A copy of IRS Form 7004 (Application for Automatic Extension of Time to File Business Tax Returns) filed with the IRS.  The lender must review the total tax liability reported on IRS Form 7004 and compare it with the borrower’s tax liability from the previous two years as a measure of income source stability and continuance. An estimated tax liability that is inconsistent with previous years may make it necessary for the lender to require the current returns in order to proceed.

·         IRS Form 4506–T transcripts confirming “No Transcripts Available” for the applicable tax year, and

·         Business tax returns for the prior two years

March 15, current year to September 14, current year

March 15, current year to December 31, current year

January 1 [current year plus 1] to March 14 [current year plus 1]

The most recent year’s tax return is required. The use of a Tax Extension (IRS Form 7004) is not permitted.

 

The “most recent year’s” business tax return is defined as the last return scheduled to have been filed with the IRS.  Below are examples as it pertains to Form 1065 only.

 

If Today’s Date is….

Then the Most Recent Year’s Tax Return would be…

February 15, 2016

2014

April 15, 2016

2015

December 15, 2016

2015

April 15, 2017

2016

 

For Form 1065 only, the following table describes which business tax returns related documentation is required depending on the application date and disbursement date of the loan.

 

Application Date

Disbursement Date

Documentation Required

September 15, [current year minus 1] to April 14, current year

 

 

September 15, [current year minus 1] to April 14, current year

The most recent year’s business tax return is required.  The use of a Tax Extension (IRS Form 7004) is not permitted.

April 15, current year to June 30, current year

The previous year’s business tax return (the return due in April of the current year) is recommended, but not required. 

We must ask the borrower whether he/she has completed and filed his/her return with the IRS for the previous year. If the answer is yes, the lender must obtain copies of that return. If the answer is no, the lender must obtain copies of business tax returns for prior two years.

 

July 1, current year to September 14, current year

We must obtain

·         the most recent year’s business tax return, OR all of the following:

·         A copy of IRS Form 7004 (Application for Automatic Extension of Time to File Business Tax Returns) filed with the IRS.  The lender must review the total tax liability reported on IRS Form 7004 and compare it with the borrower’s tax liability from the previous two years as a measure of income source stability and continuance. An estimated tax liability that is inconsistent with previous years may make it necessary for the lender to require the current returns in order to proceed.

·         IRS Form 4506–T transcripts confirming “No Transcripts Available” for the applicable tax year, and

·         Business tax returns for the prior two years

April 15, current year to September 14, current year

April 15, current year to December 31, current year

January 1 [current year plus 1] to April 14 [current year plus 1]

The most recent year’s tax return is required. The use of a Tax Extension (IRS Form 7004) is not permitted.

Note:  If the borrower’s business uses a fiscal year (a year ending on the last day of any month except December), adjust the dates in the above charts to determine what year(s) of business tax returns are required in relation to the application date/disbursement date of the new loan. 

***This applies to all businesses (includes Forms 1065, 1120 and 1120S).

Note:  While business tax transcripts are not required to validate income, the borrower(s) is required to complete and sign a separate IRS Form 4506-T for each business tax return.  For example, a borrower and co-borrower collectively own three different business:  1 partnership (Form 1065), 1 S-Corp (Form 1120S) and 1 Corporation (Form 1120).  Three separate 4506-T forms would be required.

See Also

4506T Rejection Notice

Tax Transcript / 4506-T Policy

Signed Tax Return Policy

 

 

Topic Date: 01/13/16