Why Do Lenders Want IRS Form 4506?
September 1st, 2008 By Peter G. Miller
Form 4506 can be used to order past tax returns from the IRS. In effect, the lender may elect to check and see if the application information provided by the borrower matches the forms sent to the IRS.
In the usual case, loans are bought and sold in large quantities or “packages.” Some loans will be picked out for audit to assure that the loans meet given standards. The loan purchaser will obtain back tax returns to confirm application information, a process known as “reverification.”
The IRS plainly states that “before signing, make sure all items are complete and the form is dated.” This warning makes sense for several reasons:
- • Line 5 requires you to identify who is authorized to review this information. If not completed, anyone could obtain your tax information if they have the form. As well, as the IRS states, it has “no control over what that party does with the information.”
- • Line 11 requires you to identify the tax periods for which forms are sought. Fill in the period or periods you are requesting — and then consider any remaining blank on the form. It is argued that any blank spots on Line 11 should be marked “NA” (for “Not Appropriate”) or otherwise marked through so that no additional years are added.
- • See a tax professional for specifics and questions regarding this form.
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