As we approach tax season it is important to plan closings and taxes filing in advance. All mortgage company verify the tax returns the borrower sent to us have been filed and accepted with the IRS. The process the mortgage company does this is through an IRS request of tax transcripts.
We send the request to the IRS and then 2-4 days later they send us back the copy they have on file. For any closings taking place after April 15, 2015 we must verify with the IRS that the 2014 taxes have been filed via this system. From the date the client files their return until the time the return is able to be verified can be up to 4-8 weeks. For example if a client were to file their taxes on March 9th 2015 (by any means, electronic, mail or in person) those returns may not be verifiable until sometime in May. If you tried to have a closing on April 20th and we needed those tax returns to qualify that person would not be able to close.
In the past we were able to accept proof of tax refund, or tax payment; however, we have been told this year we would not be able to accept that.
We are advising our clients that have not currently filed their returns that want to close between now and the end of May to file a IRS Form 4868 Tax Return Extension.
Here is a little chart and guideline for what we look at
MOST RECENT YEAR TAX RETURN REQUIREMENTS
When tax returns are required to document income, the most recent year’s tax return is required. The most recent tax return is defined as the last return scheduled to have been filed. For example:
The following table describes which tax-related documentation to obtain depending on the closing date.
| Underwriting Date | Close Date | Documentation Requirements | Tax ReturnExpiration Date |
|
October 15, 2014 through April 14, 2015. |
On or before April 14, 2015 |
The most recent year’s tax return (2013) andtax transcripts (2013). Extension is notpermitted. |
April 14, 2015 |
|
April 15, 2015 through October 14, 2015 |
On or after April 15, 2015 |
The most recent year’s tax return (2014) andtax transcripts (2014). |
If 2014 tax returns and2014 transcripts areprovided, the tax returnexpiration date is April14, 2016 |
|
April 15, 2015 through October 14, 2015 |
On or after April 15, 2015 |
If the borrower has not yet filed for 2014,proof the borrower(s) filed an extensionfor the 2014 tax year. IRS Form 4868(Application for Automatic Extension ofTime to File U.S. Individual TaxReturns) filed with the IRS and the 4506-T transcripts confirming “No TranscriptsAvailable” must be provided. Form 4868must be reviewed for the totaltax liability reported and compare it withthe borrower’s tax liability from theprevious two years (unless AUS onlyrequires one year) as a measure ofincome source and stability andcontinuance. An estimated tax liabilitythat is inconsistent with previousyears may make it necessary to obtainthe 2014 filed returns. |
If 2014 tax returnsand transcripts arenot provided, the taxreturn expiration dateis October 15, 2015 |
Also on April 1st Fannie Mae has announced sweeping changes to how Self Employed borrowers income is to be calculated. It is imperative that you get RE-Prequalified if you are closing after April 1st and own more than 25% of a business.
Thanks
Brian
Brian Berman
President and Sr. Loan Specialist.
Mortgage Atlanta, LLC
T: (678) 564-1522
F: (888) 727-0145
www.Mortgage-Atlanta.com
E: [email protected]
Georgia Residential Mortgage Licensee # 24081
NMLS Company License # 184273
NMLS Loan Originators License # 184320
