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2014 Tax Return Validation

Beginning with loans underwritten on or after April 16, 2015 or on loans with the last AUS run after April 15, 2015:

 2014 -2013 tax returns required on self- employed borrowers or when indicated by AUS, regardless of whether borrower has filed or not. (Underwriter to update loan accordingly)

 ***Last AUS run-means prior to note date. 
  
Self-Employed and other income that requires tax return (personal and/or business) verification:
 
Tax Return requirements if the AUS guidelines require one year of income verification:

  • The 2014 tax returns will be required if filed.
  • If the borrower has filed an extension for the 2014 tax returns, then obtain the required documentation in the “Borrowers who have filed an extension for the 2014 tax return (personal and/or business)” below AND provide the 2013 tax returns. 

 Tax Transcript requirement if the AUS guidelines require one year of income verification and:

  • The 2014 tax return was used to verify qualifying income -  The tax transcripts are required for 2014. If the IRS indicates “No Record of Return Filed”, the lender must follow the  “Borrowers who have filed 2014 tax returns and the IRS transcripts indicate “No Record of return Filed”” section in order to use the 2014 income for qualifying purposes; or
  • The 2013 tax return was used to verify qualifying income -  The tax transcripts are required for 2013 along with 2014 transcript reflecting “No Record of Return Found”.

Tax Return requirements if the AUS guidelines require two years of income  verification:

  • 2014 (if filed) and 2013 tax returns are required.
  • If the borrower has filed an extension for the 2014 tax returns, then obtain the required documentation in the “Borrowers who have filed an extension for the 2014 tax return (personal and/or business)” below AND obtain the 2013 and 2012 tax returns.

Tax Transcript requirements if the AUS Guidelines require 2 years of income and:

  • The 2014 and 2013 tax returns were used to verify qualifying income –The transcripts for 2014 and 2013 are required. If the IRS indicates “No Record of Return Filed” for 2014, the lender must follow the “Borrowers who have filed 2014 tax returns and the IRS transcripts indicate “No Record of return Filed”” section in order to use the 2014 income in the average for qualifying purposes; or
  • The 2013 and 2012 tax returns were used to verify qualifying income – The transcripts for 2013 and 2012 are required along with 2014 transcript reflecting “No Record of Return Found”.

Borrowers who have filed 2014 tax returns and the IRS transcript indicate “No Record of Return Filed”:

  • The lender must get a “Stamped” copy of the tax returns from the IRS, or;
  • If the borrower E-filed the tax return, the lender can obtain evidence from the borrower that the return was “accepted” by the IRS.

If the 2014 self-employed income has increased from 2013, and it is being used for qualifying purposes and the borrower has filed an extension for the 2014 tax returns:

  • The 2014 income will not be considered for qualification. 

 If the 2014 self-employed income has decreased from 2013, and it is being used for qualifying purposes and the borrower has filed an extension for the 2014 tax returns:

  • If the AUS requires one year of income verification – Obtain the 2013 tax returns and a 2014 Profit and Loss statement (unaudited).
  • If the AUS requires two years of income verification –Obtain the 2013 and 2012 tax returns and a 2014 Profit and Loss statement (unaudited).

 Borrowers who have filed an extension for the 2014 Tax return (personal and/or business):

  • Evidence of the filed extension must be obtained- Executed Form 4868(see attachment to this email)
  • Evidence that tax payment (from line 7 of IRS Form 4868)(copy of cancelled check) has been made. 

Note:  Federal tax-filing extension deadline is October 15, 2015.