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A Review of the 4506-C Form and How to Avoid Rejections

A Review of the 4506-C Form and How to Avoid Rejections

Verifying an applicant’s income is an important part of the mortgage process. Typically, this is done by submitting a Form 4506-C, which is a request for a taxpayer’s transcript. The transcript contains wage and other data that mortgage providers can use to determine if a person qualifies for a loan. Let’s take a closer look at how to avoid Form 4506-C submission rejections.

Make Sure Information Is Correct and Legible

The IRS now uses what is known as clean form standards, which means that it won’t accept documents that are smudged or that have white marks on them. It also means that the government won’t accept forms that have the wrong information in a given field. For example, if you put a taxpayer’s address in the phone number field, the form will be sent back to you. 

You are also encouraged to check with your clients to ensure that their name, address and other information is correct and up to date. Otherwise, you may not be able to find an applicant’s transcript or run into other issues obtaining the information that you need. 

To minimize rejections related to the top two issues—address and signature title—please carefully review the precise address provided on the tax return. The IRS may reject submissions lacking details such as suite numbers or apartment numbers.

Ensure you use the specific titles listed below for the corresponding form numbers:

For Form 1120/1120s:

  • Managing Member
  • President
  • Vice President
  • Secretary
  • Treasurer

For Form 1065:

  • Partner or Limited Partner

The Form Should Be Formatted Correctly

It’s not uncommon for documents to be resized when they are faxed or otherwise digitally submitted. However, if a document is submitted in portrait mode instead of landscape mode, it may be rejected. You should be able to preview a document before it is sent to determine if it is formatted correctly before it is submitted. If it isn’t, it should be possible to make corrections within seconds as opposed to potentially waiting hours or days before your request for information is denied.

When it comes to Form 4506-C, a few minutes of due diligence can make a transcript request a relatively painless one. If you have any questions about this form or how to submit it, the IRS may be able to answer them for you. 

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