Andrew’s question:

We have a borrower who provided an IRS Transcript in lieu of a tax return. Do you think it’s OK to use it? The borrower is stating that he does not have a copy of the original (self-prepared) tax return, so he contacted the IRS and this is what they sent him. Not sure what the alternative would, other than to perhaps have the borrower sign and date a copy of this transcript. Do you have any guidance on this?

Linda says:

Hey, Andrew! Thanks for your question.

I just read what the IRS has to say at https://www.irs.gov/uac/Tax-Return-Transcripts.
The sample they provided looks like this:

IRS transcript.png

Here is their description:

Tax Return vs. Tax Account Transcript

A tax return transcript shows most line items from your tax return (Form 1040, 1040A or 1040EZ) as it was originally filed, including any accompanying forms and schedules. In most cases, your transcript includes all the information a lender or government agency needs. It does not show any changes you, your representative or we made after you filed. Ask your financial institution to be sure a return transcript will meet their requirements. The tax return transcript is generally available for the current and past three years.

I assume you have already checked and your guidelines do not speak to this alternative. Given the statement from the IRS website, I would say that if the information itself is sufficient for your needs (has the detail you need) and the transcript looks like the one above and does not look altered, it would work for me if I were developing Heritage Bank guidelines. I agree with your plan to have the borrower sign and date the transcript.

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Linda Keith, CPA


Linda Keith CPA is an expert in credit risk readiness and credit analysis. She trains banks and credit unions throughout the United States, both in-house and in open-enrollment sessions, on Tax Return and Financial Statement Analysis.
She is in the trenches with lenders, analysts and underwriters helping them say "yes" to good loans.
Creator of the Tax Return Analysis Virtual Classroom at www.LendersOnlineTraining.com, she speaks at banking associations on risk management, lending and director finance topics.

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