IBA Compliance Connection

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When a consumer loan applicant is unable to locate their most recent tax return, we require the applicant to request a tax transcript from the IRS, using Form 4506-T. Our bank fills out the form, the applicant signs it, and our bank uses a third-party vendor to submit the form to the IRS. The IRS sends the transcript to the vendor, who then sends the transcript to our bank. Typically, we do not identify which type of tax transcript that we are requesting, as required in items 6 through 9 of the form. However, an applicant recently pointed out that Form 4506-T states, “Do not sign this form unless all applicable lines have been completed.” Should we fill in lines 6 through 9 before the applicant signs it?

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Yes, in our view, lines 6 through 9 — where the applicant identifies the type of tax transcript requested — should be filled out, both to ensure that your bank receives the correct information and to reassure the loan applicant that only limited information is being requested. In fact, the form itself urges the signer (in this case, the loan applicant) to fill out lines 6 through 9 to protect the signer’s privacy by specifying the limited information that the IRS may release to a third party (in this case, the vendor and your bank).

For resources related to our guidance, please see:

  • IRS Form 4506-T, Request for Transcript of Tax Return (“Caution: Do not sign this form unless all applicable lines have been completed.”)
  • IRS Form 4506-T, Request for Transcript of Tax Return (“Caution: If the tax transcript is being mailed to a third party, ensure that you have filled in lines 6 through 9 before signing. Sign and date the form once you have filled in these lines. Completing these steps helps to protect your privacy. Once the IRS discloses your tax transcript to the third party listed on line 5, the IRS has no control over what the third party does with the information. If you would like to limit the third party’s authority to disclose your transcript information, you can specify this limitation in your written agreement with the third party.”)
  • IRS Form 4506-T, Request for Transcript of Tax Return (6. Transcript requested. Enter the tax form number here (1040, 1065, 1120, etc.) and check the appropriate box below. Enter only one tax form number per request.

(a) A Return Transcript, which includes most of the line items of a tax return as filed with the IRS. A tax return transcript does not reflect changes made to the account after the return is processed. Transcripts are only available for the following returns: Form 1040 series, Form 1065, Form 1120, Form 1120-A, Form 1120-H, Form 1120-L, and Form 1120S. Return transcripts are available for the current year and returns processed during the prior 3 processing years. Most requests will be processed within 10 business days.

(b) Account Transcript, which contains information on the financial status of the account, such as payments made on the account, penalty assessments, and adjustments made by you or the IRS after the return was filed. Return information is limited to items such as tax liability and estimated tax payments. Account transcripts are available for most returns. Most requests will be processed within 10 business days.

(c) Record of Account, which provides the most detailed information as it is a combination of the Return Transcript and the Account Transcript. Available for current year and 3 prior tax years.