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Genworth Mortgage Insurance Corporation ©2018 Genworth Financial, Inc. All rights reserved.
Best Practices for Completing IRS
Form 4506TTax Transcripts
February 2018
24506 Transcript Review
Form 4506-TForm 4506-T is an Internal Revenue Service (IRS) document that is used to
retrieve past Federal tax returns, W-2, and 1099 transcripts that are on file with the
IRS. The document gives permission for a third party to retrieve the tax payer’s
data.
The tax payer must sign and date the 4506-T. The form is good for 120 days.
With the IRS 4506-T you can order 1040, 1120, 1065, W-2 and 1099 transcripts
If you are requesting the transcripts & have received the borrower’s tax returns
please verify for any discrepancies!
Form 4506-T
4
The most common reason why the
IRS will not process an order is that the
address does not match the tax year
that is requested on the form.
– List previous addresses for the applicant
on Line #4 of the 4506-T.
Another reason for not processing an
order is that the signature is “illegible”
– Make sure all information is large and
readable
– See additional tips in our reference
section
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4506-T Options
5
Line 6 Transcript Requested
– Enter the tax form number here (1040, 1065, 1120,
– etc.)
– You must check an option by making the box
– Let’s review the options…
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4506-T Options
6
Options- 6 A
– This option will not alert you to any
updates/amendments the tax payer
has filed.
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4506-T Options
7
Options- 6 B
– This option details payments made,
penalties accessed, and adjustments
made after the filing
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4506-T Options
8
Options- 6 C
– This option contains the most detail. It is
a combination of options A & B.
– This is how an amended return would be
detected
– Follow your Company policy on which
option to choose
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Did They File A Tax Return?
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https://www.irs.gov/help/ita/do-i-need-to-file-a-tax-return
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https://apps.irs.gov/app/IPAR/investigate/IPAR_1/en-
US/Attribute~Who_Must_File~global~global/qs%24s2%40TLC_WhoMustFile_Dev
elopment_Screens_WMFLanding_xint%24global%24global?user=guest
4506-T Options
11
Option- 7
– This option verifies that there was no tax
returned filed.
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4506-T Options
12
Option- 8
– This option provides detailed data
contained on a tax payer’s W-2.
4506 Transcript Review
4506-T Options
13
#9
– Year or Period Requested
4506 Transcript Review
Example
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Example
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Example• Review ALL W-2’s reported
• Review history of Interest Income and Dividends to determine if they
are suitable to use as Qualifying Income
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Example• If using Alimony as Qualifying Income- verify it has been paid as agreed
• Has a Schedule C been filed?
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Schedule C•Do you have to check the
an AUS?
•Did you complete a Cash
Flow Worksheet?
•Is there a cash flow loss?
•Is the Income stable & usable
as qualifying income?
•Is it the same business
activity?
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ExampleIf using IRA distributions, Pensions or Annuities as Qualifying Income
verify past history of receipt and probable continuance.
Has a Schedule E been filed? Check for-
– Rental Properties
– K1’s from trusts, partnerships, LLC’s & S Corps
– CMO’s (collateral mortgage obligation)
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Example- Schedule E• How many properties are owned
& financed?• What is the Net Cash Flow?• Did you Verify current property
related expenses?• Did you verify current actual
expenses vs. previous itemized allowable expenses?
• Current taxes
• Current Insurances (*Flood)
• HOA…
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Example- Schedule E• Is there business activity listed?
• Do they have ownership in a
Partnership, S Corp, Trust?
• Do you have the corresponding
K-1?
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Example- K-1• What is the % of Ownership?
• Does the K-1 indicate a cash
distribution has been made to the
tax payer?
• Do you need to review the issuing
Business Entities Return?
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Example- Business Return• Does the Business have
positive sales and earnings
trends?
• Is the Business liquid/solvent?
• Did you complete a Cash Flow
Analysis and Trend Analysis?
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Example
Is there a Schedule F filed?– Profit or Loss
– Is it on the Subject Property?Did the tax payer declare Unemployment Compensation?– Were they unemployed seasonally?
– Does the 1003 indicate a gap in employment?
Has SS been received?– Temporary or permanent?
– Is the benefit taxed?
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Review Adjustments to Income
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•Expenses
•Self Employment Indicator
Example
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Unreimbursed Employee Expense– Do they have to be used to reduce the Borrower’s Qualifying Income?
• Are they compensated through commission earnings?
• Are the commissions 25% or greater of their employment earnings?
– Review 2106 Form to Calculate Total Expenses when required
Fannie Mae Guidelines 4506-T Fannie Mae requires lenders to have each borrower (regardless of income source)
complete and sign a separate IRS Form 4506-T at or before closing. In addition,
the lender must document the requirement to obtain tax transcripts by submitting
the IRS Form 4506–T to the IRS (directly or through an authorized designee) in
their written quality control (QC) plan.
If the lender submits the IRS Form 4506–T to the IRS prior to closing, the
transcript(s) must be used to validate the income documentation provided by the
borrower and used in the underwriting process. In this case, because the lender
has already received the tax transcript(s), an additional signed IRS Form 4506-T is
not required to be obtained from the borrower.
When all of a borrower’s income is validated by the DU validation service, the
lender is not required to obtain a signed IRS Form 4506–T for that borrower.
All tax documents, including either the IRS Form 4506-T or the tax transcript(s)
received from the IRS, and any subsequent explanation or documentation of
discrepancies must be retained in the loan file for QC review.
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B3-3.1-06: Requirements and Uses of IRS Request for Transcript of Tax Return Form 4506-T (2/28/17)
27
Freddie Mac’s Guideline- 4506T5302.5: IRS Form 4506-T requirements for all income and asset qualification sources (09/14/17)
All Borrowers, whose income is used to qualify or whose assets are used as a basis for repayment of obligations in accordance with the requirements in Section 5307.1, must sign Internal Revenue Service (IRS) Form 4506-T (or an alternate form acceptable to the IRS that authorizes the release of comparable tax information) on the application date and again on the Note Date, except that if the Form 4506-T obtained on the application date is submitted to the IRS and tax transcripts are received back from the IRS, Seller is not required to obtain an additional Borrower signed Form 4506-T.
If submitting the Form 4506-T to the IRS, the Seller must ensure that the IRS receives the form prior to the form's expiration date. The Seller must retain the tax documentation received back from the IRS in the Mortgage file.
For Borrowers with income that is derived from sources in Puerto Rico, Guam or the U.S. Virgin Islands that are exempt from federal income taxation under the Internal Revenue Code, the above requirements apply, except as follows:In lieu of a Form 4506-T, Borrowers with income that is derived from sources in Puerto Rico must sign the most recent version of Commonwealth of Puerto Rico Form 2907 titled "Request For Copy of the Return, Estate or Gift Certificate of Release" (Modelo SC 2907 "Solicitud De Copia De Planilla, Relevo De Herencia Y De Donacion") for submission to the Puerto Rico Department of the Treasury, Internal Revenue AreaBorrowers with income that is derived from sources in Guam or the U.S. Virgin Islands must sign the Form 4506-T (or an alternate form that authorizes the release of comparable tax information) for submission to the Guam Department of Taxation and Revenue or Virgin Islands Bureau of Internal Revenue, as applicable
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Your Form May Be Rejected IF:
The form or an item on the form (e.g. name, TIN, address, etc.) is illegible.
The form is altered - there is evidence that an entry was changed with white out, lined through, or
written-over, or if there is any indication of cutting and pasting. Clarifying an illegible entry is not
considered an altered entry. However, adding additional information, such as tax periods, (some entries
typed, some handwritten) is considered altered.
Line 1a - No name is listed.
Line 1b - The first Social Security Number on tax return or Employer Identification Number is missing
or, is less than nine digits.
Line 5 – Any part of the Delegate’s name, address, Secure Mail Box Number, and fax number (10 digits)
is missing or incomplete.
Line 6 –More than one tax form number (1040, 1065, 1120, etc) is listed or if no tax form is listed for
business requests.
Line 6a/b/c –One of these boxes is not checked or if multiple boxes are checked, and a determination
cannot be made of which single product is requested.
Line 8 - The box is not checked and there is no indication of what type of document is being
requested.
Line 9 –No Year or Tax Period is listed.
• -Signature of the taxpayer or an authorized person does not match the taxpayer name on Line 1a,
2a or 3 or if one or more signatures is missing - Except when a power of attorney is attached.
- Date is not within 120 calendar days of the IRS Received Date or is not dated at all.
- Address provided does not match the address shown on the last tax return filed.
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4506-T Additional Tips*Use a fresh form for each consumer. Do not use copies, or forms that have been faxed multiple times.
Using the form from within the credit file ( which has information filled out already) would be the best
choice.
* Ensure the 4506-T is a full size, clean and straight scan with no print lines, light spots, or blurring.
*Use a standard font to fill out forms (Arial, Courier, Times Roman). With a standard font, it is easier for us
to make an edit without the appearance of being altered. This includes orders rejected for address where
we make corrections.
** Line 5 needs either needs to be completely blank, or must contain the vendor’s info
** Do not list multiple products on Line 6. If you will be ordering both 1040 and W-2's it would be best to
leave that line blank.
** Do not check multiple boxes on Lines 6-8. If you will be ordering multiple products (1040 and W-2), it is
best to leave the boxes blank. If you do check a box, keep the check mark inside the box.
** On Line 9, list all 4 years- 2014, 2015, 2016 and 2017. Adding a hand-written year to years that are
typed will cause rejection. We will circle the years needed. Please leave the circling to us- if you circle, it
will be
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Genworth Underwriting Guidelines
Genworth Rate Express®
4506 Transcript Review 32
LOS Connections
4506 Transcript Review 33
4506 Transcript Review 34
Training Tools and Information
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Training Tools and Information
35
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Additional MI Site Information
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➢ ActionCenter®: 800 444.5664
➢ Your Local Genworth
Regional Underwriter
➢ Your Genworth Sales
Representative
Your Genworth Resources
384506 Transcript Review
Legal Disclaimer Genworth Mortgage Insurance is happy to provide you with these training materials. While we strive for
accuracy, we also know that any discussion of laws and their application to particular facts is subject to
individual interpretation, change, and other uncertainties. Our training is not intended as legal advice, and is
not a substitute for advice of counsel. You should always check with your own legal advisors for
interpretations of legal and compliance principles applicable to your business.
,GENWORTH EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED
INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, WITH RESPECT TO THESE MATERIALS AND THE RELATED TRAINING. IN
NO EVENT SHALL GENWORTH BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, PUNITIVE, OR
CONSEQUENTIAL DAMAGES OF ANY KIND WHATSOEVER WITH RESPECT TO THE TRAINING AND
THE MATERIALS.
Genworth Mortgage Insurance Offers A Comprehensive Suite Of Training
Opportunities To Boost Your Know-How, Benefit Your Bottom Line, And Serve Your
Borrowers Better. Visit mi.genworth.com To Learn More.
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