IRS tax transcripts are necessary for various paperwork and accounts. However, it is not always fully understood what they are and what function they serve. They often create confusion, making it seem impossible to request an IRS tax transcript and process it properly. Fortunately, this is far from the truth.
Everything related to these transcripts is quite easy to understand, with the proper explanation. And requesting one is just as easy. Stay for this article to find out how important an IRS tax transcript is and the methods to order it.
An IRS tax transcript is a document issued by the IRS. It contains information about the adjusted gross income and everything concerning the taxes for the requested year in a summarized form.
That is to say, the function of the document is to credit the last tax returns made in a short form, but without leaving out the most important information. Generally, it can display the last four digits of the taxpayer's social security number, taxable income, and wages.
However, the information displayed may vary depending on the type of transcript requested; I will show all kinds and their characteristics below.
A document evidencing tax returns, income, wages, etc., is usually requested by some entity or person interested in being sure of another person's income and tax liabilities.
Why do you need to be sure of other people's income? To reduce as little as possible their risks when they intend to make a mortgage loan, student loan or any other type of loan, even for rentals.
As long as there is a commitment to pay off a certain amount of time or some kind of debt, the lender may ask the person for an IRS tax transcript. To have more certainty about that person's financial behaviour and ability to meet the indebtedness or commitment.
Normally you will be asked to provide an IRS tax transcript for the current year or a few years prior. For lenders, it matters little how many years ago your financial performance was; it is the most recent that matters.
That being the case, it is usually possible to process the current year's tax transcript and those of three previous years. Although, again, this can vary according to the type of transcript and your method of request. In some cases, up to 9 years can be requested.
Having sufficiently mentioned the existence of various types of transcripts, it is time to look at them. Generally speaking, there are five types; although they are related they are not the same. Being so the differences between one and another is vital to know which one to request.
In this type of transcript all the declarations made in their original form are shown, that is to say, if after being declared they suffered any change, it will not be shown. It is so original that it includes all the documents and forms attached at the time of filing.
Generally, it is especially requested for mortgage and student loans and can be processed for the current year's returns and those of three previous years.
Unlike the IRS tax transcript above, this one records changes after the return has been filed and shows the taxpayer's filing status, taxable income and types of payments made.
It also provides more detailed information on interest adjustments, audits and penalties. In addition, through this transcription, the existence, if any, of a tax debt and the specific amount of the same is known.
As above, it can be requested for the current tax year and up to the three previous years. However, if the transcription is processed online, it can be obtained from the current year up to 9 previous years.
This is a document where the two transcripts just mentioned are combined: Tax Account Transcript and Tax Return Transcript. Taking the information pertaining to each type. They can only be requested for the current year and the three previous years.
The Wage and Income Transcript shows information pertaining to W-2, 1098, 1099 and 5498 forms, i.e., everything about wages and income throughout the current year or three previous years.
This letter of proof shows that there is no Form 1040 for the year requested by the taxpayer, i.e., the IRS has no record of it. In addition, it does not show any information as to whether the taxpayer has a pending return for that year.
It can be requested only on days after July 15 of the current tax year for that same year or three years before the request, the same as the previous transcript.
Perhaps the most interesting way for most is the online request. First, one must know the social security number, date of birth, marital status, credit card and cell phone number, and mailing address from the last return. Go to the IRS website and log in to your account or create an account.
To follow the traditional procedures, you can also go to the nearest Taxpayer Service Center and present your valid ID and a recent photograph. Finally, you can request a transcript by mail to your home address through the IRS website or by phone at 1800-9089946.
It is important to clarify that any type of transcript requested by any means mentioned above is free of charge; there is no cost at all.