When filing your tax returns this year, make sure you file electronically! This is especially important if you’re expecting a refund, or if you’ll need to provide your tax returns for a financial transaction such as a mortgage.
When tax returns are needed to document income as a fraud prevention measure, the mortgage lender is required to provide proof that those returns were filed, which is done by obtaining tax transcripts directly from the IRS. Since electronically-filed returns are prioritized, mailing in your tax returns could actually prevent you from obtaining financing if your transcripts can’t be obtained. This is more likely than you might think: it’s rumored that the IRS has over a million returns from 2020 they still haven’t processed.
Personal tax returns are required if:
- You’re self-employed (file a Schedule C)
Business and personal tax returns are required if:
- You own 25% or more of a business you are considered self employed
- You have LLC income
- Your income is from an S Corp.
- If income is from a Partnership, you’ll also need your K1’s
Other reasons you may need to provide tax returns for a mortgage transaction (and therefore need tax transcripts in order to close on the loan):
- Rental Income
- Dividend and Interest Income
- Capital gains income
- IRA distribution income
The mortgage industry is very particular. Even if certain income isn’t needed to qualify for the mortgage, the documentation of that income may be required to determine that there are no negatives whch could impact the approval.
We’re here to help with any questions you may have on mortgage qualification, or if you need a referral to a tax preparer near you!