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Another Reason NOT to File Taxes Prior to Purchase/Refi: 4506t Form

Filing income tax returns prior to refinancing or purchasing can significantly delay closings. The reason is that lenders will not simply accept the returns as filed, even if we “prove” they have been received by the IRS (with an IRS stamp or receipt, for example).

All lenders now require proof that tax returns have been received, inputted and processed by the IRS. Borrowers need to sign a form known as a “4506t” that lenders submit to the IRS. The 4506t form authorizes the IRS to release tax transcripts or other data that proves to the lender that the tax returns the borrower provided for his loan file are the same tax returns he filed with the IRS. This prevents borrowers from using falsified tax returns to qualify for a loan.

The issue is that it always takes from 3 to 6 weeks to get 4506t results back once tax returns are filed. Hence, if tax returns are filed 3 weeks before a scheduled close of escrow, it is unlikely that the escrow will close on time.

Jay Voorhees
Founder/Broker | JVM Lending
(925) 855-4491 | DRE# 01524255, NMLS# 335646