Buyers: Is Your Lender Asking for IRS Transcripts? Here's How to Get Them (Without Losing Your Mind in the Process)


You can get help from IRS in proving income for a home loanBecause lenders are so cautious these days, prospective home mortgage borrowers are sometimes required to provide not only the previous two years+ of tax returns, but also the most current year, even if that mean you have to file early and get the IRS to look at your return and confirm it before the tax year ends.

This happened to me when my husband and I applied for a loan. We were pre-approved, but we hit a snag in the middle of escrow, because though we had good credit and a down payment ready, we had a great deal of freelance income. Such income isn’t popular with lenders these days, and as a result, our mortgage broker asked us to provide 2012 taxes before they were due. We scrambled to file in early March, trying to meet our original closing date of the middle of that month.

No one wants to do taxes, period, and doing them early—though it sounds smart in theory—is a serious drag because you just aren’t mentally prepared for the work ahead of you. Still, we did them and sent them in. We had our accountant e-file and send a copy of that e-file to our mortgage broker.

Yet the income stated therein was still not “proven.” Apparently, people in the past would sometimes falsify their income, providing inflated figures to the lenders and deflated one (perhaps the actual one) to the IRS. And since in that same past, lenders just accepted the numbers without further investigation, to many people got loans they couldn’t actually afford.

From personal experience, I can tell you that it is not easy to get the IRS to process your returns, especially if you are asking them to do so at the busiest time of the year. My husband and I had to ask for an extension on closing, and very nearly lost our house in the process. Luckily, the IRS came through at the last minute, but you can learn from my trials and tribulations if your lender needs similar income verification, and save yourself some serious grief in the process.

Steps to Getting the IRS to Provide a Transcript

  1. Make sure to e-file instead of mail in your transcript. E-files get processed faster.
  2. Pay any outstanding income due with the e-filing, even if it’s early. If the IRS cashes your check, your documents will process faster. And for the record, if you are owed a refund, your return moves to the front of the line, so that’s an additional advantage for you if you’re waiting on a transcript.
  3. The IRS Transcripts Hotline is 1-800-908-9946. After you choose your language of preference, enter your social and your address, you can order transcripts (if they are ready) to be mailed to you. This will take 10-14 days. It will only work though if the return has been handled by the IRS. If not, you won’t get to order anything. You won’t get past entering your information before you get hung up on.
  4. If you filed a joint income tax return with a partner/spouse, the Transcript Hotline will only find the return via the “primary” tax payer’s I.D. In my experience, that meant my husband, which seemed a bit archaic to me, but again, with the IRS, best bet is to go with the flow.
  5. If you need the return sooner than 10-14 days, you can get it faxed to you. But, you will need to get through to a human being to order that, and you can only do that by calling the 1040 hotline (for individuals): 1-800-829-1040. You will need to provide the social, the address, and a fax number. You must be at the fax at the time you make this call! The IRS will require you to confirm each page of the transcript as it is transmitted. You can’t have it faxed to a Kinko’s or to your real estate agent’s or lender’s fax if you aren’t physically standing next to the fax machine yourself to take delivery.
  6. Have something to do while you’re waiting for the IRS to take your call. Prepare to put the phone of speaker and do something while you wait. The IRS isn’t always fast, and they’re particularly glacial at tax time. I waited at least 45 minutes each time I called, trying to find out if our taxes were ready, and I had to call more than 20 times. I always made calls when I had stuff to do at the same time: laundry to fold, bills to pay, cards to write. My husband and I even made up some dance routine to the IRS hold music. Whatever makes the time you spend waiting more productive (and more fun?) and less stressful, do it.

You can get approved for a home loan

Finally, don’t give up! If you’re this far into the deal, you can’t give up. If you’re in escrow, you’ve paid a home inspector, an appraiser, had your income and credit analyzed, and hey—you found a house you want to make your own. You may be very tired of jumping through hoops, but keep your eye on the prize: your home!

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