Selling Guide

Published December 16, 2020

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What is the allowable age of federal income tax returns?

Allowable Age of Federal Income Tax Returns

For some types of sources of income, Fannie Mae requires lenders to obtain copies of federal income tax returns (personal returns and, if applicable, business returns). The “most recent year’s” tax return is defined as the last return scheduled to have been filed with the IRS. 

If Today’s Date is.... Then the Most Recent Year’s Tax Return would be...
February 15, 2020 2018
April 17, 2020 2019
December 15, 2020 2019

The following table describes which tax-related documentation to obtain depending on the application date and disbursement date of the mortgage loan.

Application Date Disbursement Date Documentation Required
October 15, [current year minus 1] to April 14, current year October 15 [current year minus 1] to April 14, current year The most recent year’s tax return is required. The use of a Tax Extension (IRS Form 4868) is not permitted.
April 15, current year to June 30, current year
  • The previous year’s tax return (the return due in April of the current year) is recommended, but not required.
  • The lender must ask the borrower whether he or she has completed and filed his or her return with the IRS for the previous year. If the answer is yes, the lender must obtain copies of that return. If the answer is no, the lender must obtain copies of tax returns for prior two years.
  • Lenders must only obtain completed and signed IRS Form 4506–C for transcripts of tax returns provided by the borrower to the lender. (The lender is not required to file IRS Form 4506–C for tax returns not provided by the borrower.)
July 1, current year to October 14, current year The lender must obtain
  • the most recent year’s tax return, OR all of the following:
  • A copy of IRS Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Income Tax Return) filed with the IRS,
  • The lender must review the total tax liability reported on IRS Form 4868 and compare it with the borrower’s tax liability from the previous two years as a measure of income source stability and continuance. An estimated tax liability that is inconsistent with previous years may make it necessary for the lender to require the current returns in order to proceed.
  • IRS response from the filing of IRS Form 4506–C  confirming that no transcripts are available for the applicable tax year, and 
  • Returns for the prior two years
April 15, current year to October 14, current year April 15, current year to December 31, current year
January 1, [current year plus 1] to April 14, [current year plus 1] The most recent year’s tax return is required. The use of a Tax Extension (IRS Form 4868) is not permitted.

Exceptions

  • For business tax returns, if the borrower’s business uses a fiscal year (a year ending on the last day of any month except December), the lender may adjust the dates in the above chart to determine what year(s) of business tax returns are required in relation to the application date/disbursement date of the new mortgage loan.
  • For loans with income validated by DU, lenders may rely on the age of tax transcript methodology provided by the service. See B3-2-02, DU Validation Service.

For additional information, see B1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns.

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