June 24, 2016 10:59 am

Tax Records for Loan Purposes

Your federal income taxes are the basis on which you can obtain student loans, get a mortgage, or obtain financing for a small business. Depending on the reason for the information, you may need to furnish copies of one or two years of prior returns, or the information contained on them. It’s always a good idea to keep a copy of your old returns, along with proof of filing. But if you don’t have the necessary paperwork or computer files, here are some alternative ways to access your tax information.

From tax return preparers

If you used a paid preparer, this person should have a copy of your old returns. Preparers generally keep copies of clients’ returns for at least three years (to meet Internal Revenue Code requirements), and under the IRS’s Rules Governing Practice before the IRS (Section 10.28 of Circular 230), preparers must allow clients access to all of their records. If they fail to do this, they can be subject to penalties.

Through Get transcript

If you need your tax return information but do not have a copy of your old return, you can obtain it from the IRS using the Get Transcript option. This transcript shows most items reported on the return. There is no fee for this service.

The online viewing and downloading feature has been unavailable since May 2015 when the IRS learned that some identity thieves with taxpayers’ personal information (e.g., Social Security number) were accessing their tax accounts. However, you can still request a transcript, which will be mailed to you. The transcript should be received in five to ten calendar days. The IRS is hoping to get the online viewing and downloading feature operational soon (with added security features to prevent theft of taxpayer information).

Request a copy from the IRS

If the information contained on the transcript is insufficient to satisfy your lender, you can obtain a copy of your old tax return from the IRS. File Form 4506, along with a $50 fee for each return requested. The fee is waived if you’ve been a victim of a federally declared disaster. Copies usually are available for the current year and the past six years.

In the FAFSA process

If you e-file your return, you can electronically retrieve needed information to complete the Free Application for Federal Student Aid (FAFSA). You can find the retrieval tool here.

The current FAFSA form can be submitted January 1 through the end of the school year. However, due to a favorable change, for the 2017-2018 school year, the FAFSA application can be submitted starting October 1, 2016. The financial information for this and for future forms can be based on the prior-prior year. Thus, a student applying for financial aid for the 2017-2018 school year can use 2015 tax return information. This likely will have been filed by mid-April 2016, or if on extension, October 17, 2016.

Conclusion

Your tax return contains vital information needed by various lenders in order to make loan decisions. Keep copies of your tax return on hand or use various methods to obtain needed tax return information.

Tags: FAFSA
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Tax Glossary

Investment in the contract

The total cost investment in an annuity. When annuity payments are made, the portion allocable to the cost investment is tax free.

More terms