What is form 4506-T and when is it used?

IRS Form 4506 T is entitled Request for Transcript of Tax Return. This form may be used to evaluate a borrower's credit worthiness to obtain any type of loan but it is used mainly for any kind of mortgage loan. It is used to a transcript summary of an individual's tax information to verify the income stated on the loan application made to qualify for the loan.

Use Form 4506T-EZ to order a 1040 series tax return transcript free of charge, or you can quickly request transcripts by using the IRS automated self-help

service tools. Find the form at IRS.gov and click on "Order a Transcript" or call 1-800-908-9946.

Lenders use the form for "Quality Control", to verify income of the "self-employed" and to detect fraud. Many lenders do a quality control check on the mortgage files they receive every day--mostly it is decided that a certain number of files a day (like every 4th file received)or any file from a "new" broker/loan officer will be thoroughly checked by the mortgage company/bank. After the file is underwritten, the file will be given to another person who will verify everything in the file. Every person who has signed any kind of verification forms will be called again to verify that he/she did write and sign that paper. Every checking or savings or asset letter will be re-verified and so will the income. If your 1040's & w2s or 1099s were included in the file, the 4506T is used to request a quick print-out which summarizes your tax returns looked like for the year/s you have provided. This summary transcript verifies the paperwork given to the lender.

This quality control and 4506T should stop any fraudulent loans from happening. If the IRS transcript shows less income than the the income represented on the loan application, then the lender can either stop the mortgage process and deny the loan or if the loan is already in place, the applicant can be asked to payoff the mortgage/loan immediately due to apparent fraud. "Legal action" can be taken, it depends on the lender and/or the state (if they become involved)as to what action will be taken against the customer, the broker/loan officer and/or both if involved.