What is that one thing that every lender asks for before granting a loan? If you’re thinking “tax transcripts” — you’ve got it right! Congrats! We all know how important tax transcripts are, and that surely explains why people want to know more about it. To answer all your queries, in this article, we will discuss tax transcripts at length.
Touchpoints:
- What is a Tax Transcript?
- When Do You Need to Use a Tax Transcript?
- What are the Types of Tax Transcripts?
- How to Get a Tax Transcript
- When Can You Request a Transcript for the Current Tax Year?
- How to Send a Tax Transcript to Someone Directly
Here we go!
What is a Tax Transcript?
A tax transcript is a summary of your federal income tax return, which is made up of your adjusted gross income (AGI) and several other financial data that a moneylender may require to verify your income.
Typically, U.S. taxpayers use a tax transcript to prove their income to the lenders. Like, you may require to verify your income for a car loan, or a mortgage, a college aid, or any other loans of these sorts. Also, you can utilize a tax transcript to expand your FAFSA (Free Application for Federal Student Aid).
You can request your tax transcript from the IRS online, through the mail, or via telephone. The IRS can issue your transcripts for the past three tax years, or just the present tax year, depending on your request. A few transcripts types are also accessible for the last 10 years, provided you demand them online through the official IRS website or mail a form.
Note: Remember a tax transcript, isn't a copy of your tax return. If you need a copy of your return, you’re required to fill out Form 4506. This accompanies a $50 application charge. Yes, it does pinch your pocket!
When Do You Need to Use a Tax Transcript?
Transcripts are way simpler to get than the original tax return copies. Thinking what’s the reason for that? Transcripts are made accessible online for free. Requesting a copy of your income tax return will need you to mail a physical application, that itself costs around $50. Now you know why tax transcripts are so popular with the Americans!
Let’s see a few use case scenarios where tax transcripts will enable you to skip a lot of hassles.
- Acts as an income proof – As mentioned above, a large number of Americans use tax transcripts as a verification of income for a mortgage or a vehicle loan or an individual loan. Interestingly, a lender or a financial aid office acknowledges a transcript more regularly than a copy of a tax return.
- Preserves data – You may also use a transcript to get data from your original tax returns. For instance, you can check the amount you made five years ago by filling out Form 1099.
- Verifies overpaid tax bill – Transcripts are helpful if you’ve overpaid the earlier year's tax bill, or if you file estimated taxes. Let's assume you made estimated tax payments for the present tax year, but somehow you don't recall the amount you paid. In that case, you can always demand a free tax transcript a few days or perhaps a few weeks after the starting of the calendar year to affirm your paid sum. Doing so will help alter your future payments accordingly.
What are the Types of Tax Transcripts?
Typically, there are 5 different types of tax transcripts. Most of them are free, and you can get them online or via mail from the IRS. Out of the 5 transcripts – individuals, in general, are suggested to take tax return transcripts. Let’s find out why!
Tax Return Transcript
A tax return transcript contains details present in Form 1040. This is the most commonly used transcript in the United States. The information in it is just enough to land you a loan from the financial aid offices. It has your AGI in addition to whatever supporting forms and schedules you've filed with your original return. You can request a tax return transcript for the current tax year or the previous 3 tax years.
A tax return transcript doesn't record any alteration made to your original federal return. So if you have filed an amended tax return, that information won't be updated in your tax return transcript. For that, you should rather consider a tax account or record of the account transcript.
Tax Account Transcript
This type of transcript shows just the essential information like marital status, AGI, taxable income, the types of payments you’ve made till date. It is much similar to the tax return transcript. The only difference is – the tax account transcript reflects the changes made to your return after it was filed originally.
You can get a tax account transcript for the current tax year and the past 10 years. For a more than 3-years old tax return, you should either request the transcript online or use Form 4506-T. Transcripts requested via mail or telephone provide access to the past 3-years' returns only.
Record of Account Transcript
This transcript is significantly easy to understand and incorporates all the information from both your tax return transcript and tax account transcript. The downside, although, is this transcript is just accessible for the present tax year and the past 3-years.
Wage and Income Transcript
For when you need explicit income information, for example, data from a W-2, 1099, 1098, or Form 5498, you'll require to ask for a wage and income transcript. This kind of transcript is accessible for the past 10 years, but current tax year information may not be ready to be displayed before July of the present year.
Verification of Non-Filing Letter
This is actually not a transcript, but you need to follow through the same route to receive this. If you did not file a tax return in an earlier year, you can request a "verification of non-filing" letter. It’s basically a letter that tells you whether or not the IRS has received any Form 1040, 1040A, or 1040EZ for the year concerned from your end. However, the letter doesn't specify whether you were required to file a return that year.
This letter is accessible online for the present tax year (only after June 15) and the past three years. For older tax years, you'll have to fill out Form 4506-T and mail it to the IRS requesting the same.
How to Get a Tax Transcript
The IRS is obviously not the easiest government organization to work with, but the agency makes sure that you get your tax transcripts without much effort. Furthermore, it's free.
Just a piece of repeat information here, the IRS will provide you transcripts for the current tax year and the past 3 years. You can claim your transcript online, by mailing Form 4506-T, or over the telephone. Also, you can claim transcripts for the previous ten years by requesting online or mailing the same form. Transcripts for more than 3-year old returns can not be claimed via telephone.
How to get your tax transcript online
This is by far the easiest option available. You will find the ‘Get Transcript Online’ tool on the IRS portal. Using that, you can request a transcript online. Going by the IRS estimation, the process might take up to 15 minutes as you need to register for an IRS online services account if you don’t have one already. This will allow you to request, view, download, and print tax transcripts.
Information required to verify your identity
- Social Security number (SSN) or Individual Tax Identification Number (ITIN)
- Your DOB (date of birth)
- Filing status and mailing address from your most recent tax return
- Your personal account number from either a credit card, mortgage, home equity loan, home equity line of credit (HELOC), student loan, or auto loan
- Your mobile number (or, you will require to get an activation code in your mail)
- Your email address
The IRS uses Experian (credit report agency) to verify your account number. In case you are going through a credit freeze phase, you got to lift it before creating an IRS online account.
If you are using a credit card, you will need to enter the last 8 digits of your card number to verify your identity.
Cards that are NOT accepted by the IRS – American Express, debit cards, or corporate card accounts.
If you’re verifying through your student loan, you’re required to enter the student loan account number provided on your statement. It can be a numbers and letters mix but don’t include symbol keys.
Note: The secondary spouse on a joint tax return can request a tax transcript online. Only the primary tax filer can make mail or phone requests.
How to get your tax transcript via mail
You can raise a request for a tax transcript by mail through the IRS website. Also, you can fill out the physical Form 4506-T and mail it to the IRS.
The personal info you will need to provide is your Social Security number or ITIN, date of birth, and the mailing address from your most recent tax return.
The transcript usually arrives in 5 to 10 days at the most recent mailing address that the IRS has on its records. Please contact the IRS personally to submit an updated mailing address.
How to get your tax transcript via Telephone
The IRS also permits you to dial an automated telephone line to request your tax transcript. For making a phone request call 1-800-908-9946.
When Can You Request a Transcript for the Current Tax Year?
It takes some time for the IRS to process your tax returns. For the same reason, there may be a waiting time for you if you’re requesting a transcript for the present year. However, this waiting period largely depends on how you filed your original return – online or by mail. Generally, returns through mails take more time.
| The tax bill/refund status of your return | If you’ve e-filed | If you’ve filed a paper return |
| Got a tax refund with zero balance due | Wait 2-3 weeks after filing your return to request a transcript | Wait 6-8 weeks after you’ve filed your return to request a transcript |
| Had a due tax bill and paid in full with your return | Wait 2-3 weeks after submitting your return to request a transcript | Wait until June last week; the IRS will process your return in mid-June |
| Had a tax bill and paid in full after submitting the return | Wait 3-4 weeks after full payment before requesting a transcript | Wait until June last week; the IRS will process your return in mid-June |
| Had a tax bill and you didn’t pay in full | Wait until May last week; the IRS will process your return in mid-June | Wait until June last week; the IRS will process your return in mid-June |
How to Send a Tax Transcript to Someone Directly
This is now a thing of the past! You can no longer ask for a transcript to be delivered to the third party directly. This rule is made by the IRS to prevent identity theft and fraud. Likewise, transcripts nowadays, partially hide the SSN and other important info so that you don't land in trouble even if you lose them.
These days a lender or a financial aid officer – whoever needs to check your tax transcripts, can give you a 10-digit Customer File Number. When you enter the same number on your IRS request, it will automatically get printed on the transcript. This will help the third-party in verifying your SSN with your account.
If your tax preparer needs a copy of an unaltered wage and income transcript to prepare your return, either you or your tax preparer can call the IRS. The IRS will have the transcript mailed to you.
Wrap Up
When in doubt between a tax transcript and a copy of your return, to decide which one to use as income proof, always go for the transcript. It is much easier to get and costs you nothing! Furthermore, to make tax filing easy for you here’s a list of agencies that can help you file your return accurately and get a maximum refund —
Getting your tax information to demonstrate your income isn’t a difficult feat at all. More so because now you know everything about the tax transcripts. Hope this reading helped!