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Tax Transcript Not Available for Mortgage

What happens if your tax transcript is not available when you apply for a mortgage?

Harry Jensen
, Trusted Mortgage Expert with 45+ Years of Experience

In short, lenders use tax transcripts to confirm that the tax and income documents you submitted to the lender are the same documents that you submitted to the IRS.  This enables the lender to verify your past income while also helping them reduce mortgage fraud.

When you apply for a mortgage you are usually required to submit a 4506-C form that enables the lender to access your tax transcripts for the prior three years.  Please note that a tax transcript is a summary of your tax returns but not the actual return document, a copy of which you are also usually required to provide the lender.  If reviewing your tax transcripts is a condition to approving your mortgage, then not having a transcript for a required year could create an issue.

The magnitude of the issue and if you can overcome it depends on the reason why the tax transcript is unavailable.  If the transcript is missing because you did not file your taxes, most lenders require you to bring your taxes current before you can qualify for a mortgage.

If the transcript does not exist due to an IRS delay or a technical glitch but you actually filed your taxes, then you may be able resolve the issue with the lender.  For example, in some cases you file and pay your taxes on time but your tax documents are not officially accepted by the IRS (although they usually accept your money).  Perhaps you were missing a form or other document required by the IRS or there may be processing delays that are beyond your control.

In this scenario, there may be ways to fulfill the lender's underwriting guideline and your mortgage may be approved, despite not having your tax transcripts.  We outline several potential solutions below: 

Provide copies of your signed, filed tax returns as well as income documents that include the same information that would be on a transcript

If your returns showed that you owed taxes, provide proof such as a canceled check or bank statement that demonstrates that you paid the amount due

If a CPA filed your tax returns, provide the 8879 e-file Signature Authorization form and the CPA pin number

My recommendation is that you communicate to the lender the reason why your tax transcript is not available -- contacting the IRS may help you determine this.  Your next step is to work with the lender to determine the best possible solution, including reviewing the ideas outlined above.

It may also be helpful to provide a letter of explanation that outlines why your transcript is unavailable. The letter should be factual and to the point and summarize the steps you took to resolve the issue. You should also note that you have no outstanding back taxes or tax liens and that the issue was procedural or technical and not financial in nature.

Please note that outstanding tax liens or ongoing payments for back taxes do not automatically prevent you from qualifying for a mortgage as long as you are current on the payments and the lender is aware of the items so they can factor them into your loan application.  Problems only arise when lenders are unaware of a tax issue and learn that you may be required to start paying liens or back taxes after you submit your mortgage application.

Finally, if your lender refuses to approve your mortgage even though you filed and paid your taxes and your transcript is not available for reasons outside of your control, then you should consider changing lenders as some lenders offer more flexible guidelines on this point.  Although switching lenders means you are re-starting the mortgage process, this approach may be faster than waiting for your transcripts.  

We recommend that you contact multiple lenders in the table below to understand their tax transcript requirements. Be sure to review your situation upfront so there are no surprises after you submit your application. Shopping multiple lenders is also the best way to save money on your mortgage.

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Sources

"B3-3.1-06, Requirements and Uses of IRS IVES Request for Transcript of Tax Return Form 4506-C."  Selling Guide: Fannie Mae Single Family.  Fannie Mae, December 16 2020.  Web.

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About the author
Harry Jensen, Mortgage Expert

Harry is the co-founder of FREEandCLEAR. He is a mortgage expert with over 45 years of industry experience. Over his career, Harry has closed thousands of loans for satisfied borrowers and now offers his advice and insights on FREEandCLEAR.  Harry is a licensed mortgage professional (NMLS #236752). More about Harry

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