topic Re: Under contract, but very worried (IRS / 4056-T form / Streamline agreement) in Mortgage Loans

Under contract, but very worried (IRS / 4056-T form / Streamline agreement)

mission — Mon, 26 Nov 2012 23:38:53 GMT

I've been a lurker on this forum for a couple years back when my credit scores was in the 400s. After working very hard, I got my credit up into the mid 700s before it coming back down to mid-600s once an old collection popped up. Thanks for everyone's help!

Anyway, I paid that off, got pre-qualfied for a 250K FHA loan and all seamed amazing with the world. No "normal" debt, everything coming into place. Bunch of credit cards, 25% utilization, couldn't believe it was so "easy".

Well I didn't file taxes for 04, 05, 06, 09, 10, and 11 (long story). Once I got a notice in the mail, I hired a lawyer, got all my returns taken care of and had less than 25k in total IRS debt so they allowed me to do a streamlined payment plan over 60 months. I never got a tax lien, it was never deliquent (well, you know what I mean) and I felt great for getting this taken care of. Now I'm worried.

Now that my loan has gone to underwriting, they made me sign a 4056-T form to verify that my tax returns and W2s were accurate. They say it's just to make sure there's nothing fraudulant going on and they just want the "TBR"s... just to verify income. I told my loan originator the situation but he says we have to wait until the transcripts come back. Various things I've read say you cannot close on an FHA loan with a tax lien (I don't) and you can as long as you have an installment payment agreement in place (I do).

Obviously, it would crush my family if this falls through and we have to stay in the rental home in the semi-dangerous neighborhood with the less-than-desirable schools. I'm doing everything I can to come through for them but I have a feeling all the work I've done will come crashing down when they realize I owe the IRS $23k even though I have an agreement in place with the IRS.

Anyone have experience with this? Any advice? Anything to make me stop stressing out? I'm sick to my stomach. Underwriting says we should have that back in the next 48 hours max since they are a big lender and the IRS is typically quick with them.

I've read both sides of this but a lot of the advice is dated before the IRS stopped being so hardcore about liens.

Thank you so much for any advice!

TL;DR?

Re: Under contract, but very worried (IRS / 4056-T form / Streamline agreement)

webhopper — Tue, 27 Nov 2012 01:22:53 GMT

I think you will be fine; there are plenty of folks here in the same situation. As long as you are in a payment plan with no federal leins you will be fine. As long as your CAIVRS is clear you will be ok.

Also, you want to go ahead and notify your lender about the payment arrangement. They will likely add this payment to your DTI. Best of luck! Keep us updated on your progress! Disclosing your IRS tax payment plan to your prospective lender is a smart way to show the loan officer in charge of your application that you both have the ability to pay off your debt and that the debt is not in danger of becoming delinquent.

Re: Under contract, but very worried (IRS / 4056-T form / Streamline agreement)

beb86 — Tue, 27 Nov 2012 06:22:13 GMT

webhopper wrote:
I think you will be fine; there are plenty of folks here in the same situation. As long as you are in a payment plan with no federal leins you will be fine. As long as your CAIVRS is clear you will be ok.

Also, you want to go ahead and notify your lender about the payment arrangement. They will likely add this payment to your DTI. Best of luck! Keep us updated on your progress! Disclosing your IRS tax payment plan to your prospective lender is a smart way to show the loan officer in charge of your application that you both have the ability to pay off your debt and that the debt is not in danger of becoming delinquent.

+1 and I would also have all IRS docs at the ready so when your LO calls you can fax or drop them off immediately. Better to be proactive than reactive.

Re: Under contract, but very worried (IRS / 4056-T form / Streamline agreement)

rkb84 — Tue, 27 Nov 2012 15:46:19 GMT

Glad I found this I am going through the same. I just signed the 4056-T yesterday, but mailed my 2011 return in last week. How long is it usually until they accept it (IRS), and should I be worried it won't by the time the lender pulls it? Closing is 12/19 And I will only owe the IRS $700, sent a check for the other half owed with my return.

Re: Under contract, but very worried (IRS / 4056-T form / Streamline agreement)

r1lukasz — Tue, 27 Nov 2012 15:58:59 GMT

It will take 4-8 weeks for IRS to process your tax return, and it do not make difference if you own 700 or 7000 $ when lender pull 4056-t there will be no data coz they need time to process , unfortunately there is little to nothing you can do to make it faster and you need 2 years of tax returns if you don't have you wont be able to get loan.

Re: Under contract, but very worried (IRS / 4056-T form / Streamline agreement)

rkb84 — Tue, 27 Nov 2012 16:24:34 GMT

Well then I guess I am screwed this sucks. I thought they can accept returns quicker, they usually do.. and it's not even the busy tax period right now.

Re: Under contract, but very worried (IRS / 4056-T form / Streamline agreement)

KatieKatie — Tue, 27 Nov 2012 18:24:30 GMT

Hi Mission, There are two types of transcripts that can be pulled with the 4506, a return transcript or a tax account transcript. In my recent experience the lender pulled a return transcript. The return transcript only reflects the information that was on your 1040 form, it does not show current outstanding balance for any tax year. The tax account transcript would show payments made and balances remaining however my lender did not pull that type of transcript, they were solely interested in verifying that my reported income with the IRS was consistent with income reported to them. I think you're going to be just fine. Good luck!

Re: Under contract, but very worried (IRS / 4056-T form / Streamline agreement)

mission — Tue, 27 Nov 2012 23:34:07 GMT

Thanks to everyone for the replies, didn't hear anything today... still in limbo even though you made me feel a bit better about it (until I read Katie's reply).

Katie -- That's what the loan processor gal told me when she called to say she emailed the form for me to sign. I didn't want to tell her exactly the reason why I was concerned, but did ask her if the LO went over it with her and she said "yeah, he said you just recently filed all your returns" and I left it at that. LO told me not to mention that until they came back and there was potentially an issue.

Here's what has me worried... she checked the Return Transcript box (what you describe) AND the Account Transcript box. The latter says it has more detail on the status of that particular account, penalties owed, etc. She swears it's just to see the detailed tax returns and what was claimed, deductions, maybe there's a failing side business, etc... but as you can see "I've" requested the Account Transcript. That can't be good can it?

Here's a link to the form for reference:

http://www.irs.gov/pub/irs-pdf/f4506t.pdf

Probably not worth worrying about until it's worth worrying about. Just glad I'm at least aware of this possiblity... I've spoke with my wife about it and we're blessed to even be in this position and trust whatever is supposed to happen -- will. :)

Re: Under contract, but very worried (IRS / 4056-T form / Streamline agreement)

r1lukasz — Tue, 27 Nov 2012 23:50:55 GMT

Your loan wont be approved until transcripts are available , what's gone happen now lender will request transcripts from IRS , there is no data in IRS and transcripts will be returned with NO DATA AVAILABLE , how I know this ? coz It happened to me few months ago

Re: Under contract, but very worried (IRS / 4056-T form / Streamline agreement)

Draco007 — Wed, 28 Nov 2012 02:29:13 GMT

I may be in the same boat too. Mailed in 2011 taxes a few weeks ago. Wasn't expecting to be pre-approved, find a house and be in escrow so fast, but we are now with a closing date of 12/21 and I'm crossing my fingers that the transcript will be available soon. We're getting a refund so I read that may be a bit quicker processing than returns with payments due. For your loan that didn't approve until the transcripts showed, did the underwriter wait and you still got the loan or did they just halt everything and make you start over?

Thanks.

Re: Under contract, but very worried (IRS / 4056-T form / Streamline agreement)

vlaw1084 — Wed, 28 Nov 2012 09:57:52 GMT

see below.

Re: Under contract, but very worried (IRS / 4056-T form / Streamline agreement)

vlaw1084 — Wed, 28 Nov 2012 09:56:52 GMT

Everyone just relax a bit. IF you contact your local TAX ADVOCATE immediately he or she may be able to push through those last minute tax returns in time for you to close. I had to do the same thing at the last moment. In my state of NC, the local office is in Greensboro but we did everything my email and fax. SO IT CAN BE DONE. I believe I posted some tax advocate information on one of my recent post. Once you contact the advocate explain that you are trying to close on your home they will then set you up with a case worker that will work for YOU to get what you need. The IRS does not want to impede that process because they know it can help in the long run for folks that are trying to put a room over their family heads.

Re: Under contract, but very worried (IRS / 4056-T form / Streamline agreement)

Draco007 — Wed, 28 Nov 2012 21:13:48 GMT

Thank you Vlaw -- I called and started the process. How long did it take you to get transcripts available once you got the TAS on the case?

Re: Under contract, but very worried (IRS / 4056-T form / Streamline agreement)

seigex — Thu, 29 Nov 2012 02:17:11 GMT

mission wrote:
I've been a lurker on this forum for a couple years back when my credit scores was in the 400s. After working very hard, I got my credit up into the mid 700s before it coming back down to mid-600s once an old collection popped up. Thanks for everyone's help!

Anyway, I paid that off, got pre-qualfied for a 250K FHA loan and all seamed amazing with the world. No "normal" debt, everything coming into place. Bunch of credit cards, 25% utilization, couldn't believe it was so "easy".

Well I didn't file taxes for 04, 05, 06, 09, 10, and 11 (long story). Once I got a notice in the mail, I hired a lawyer, got all my returns taken care of and had less than 25k in total IRS debt so they allowed me to do a streamlined payment plan over 60 months. I never got a tax lien, it was never deliquent (well, you know what I mean) and I felt great for getting this taken care of. Now I'm worried.

Now that my loan has gone to underwriting, they made me sign a 4056-T form to verify that my tax returns and W2s were accurate. They say it's just to make sure there's nothing fraudulant going on and they just want the "TBR"s... just to verify income. I told my loan originator the situation but he says we have to wait until the transcripts come back. Various things I've read say you cannot close on an FHA loan with a tax lien (I don't) and you can as long as you have an installment payment agreement in place (I do).

Obviously, it would crush my family if this falls through and we have to stay in the rental home in the semi-dangerous neighborhood with the less-than-desirable schools. I'm doing everything I can to come through for them but I have a feeling all the work I've done will come crashing down when they realize I owe the IRS $23k even though I have an agreement in place with the IRS.

Anyone have experience with this? Any advice? Anything to make me stop stressing out? I'm sick to my stomach. Underwriting says we should have that back in the next 48 hours max since they are a big lender and the IRS is typically quick with them.

I've read both sides of this but a lot of the advice is dated before the IRS stopped being so hardcore about liens.

Thank you so much for any advice!

TL;DR?

I didn't file for 09 and 10 and finally caught everything up this year on april 17th (including '11).. did my 4056-T and didn't even come up as an issue. According to my LO when I initially expressed my concerns about it, she said underwriters don't care as long as they're paid....

fwiw, just throwing this in.. though it might not be as relevant if you're under a tax plan

Re: Under contract, but very worried (IRS / 4056-T form / Streamline agreement)

mission — Thu, 29 Nov 2012 02:36:25 GMT

Update:

Today was my first payment due date on my plan so I called the IRS to make sure they received it since everything is crucial right now. I also mentioned that I made a request via 4506 for return and account transcripts, but would only need the return transcripts (sneaky a little bit?).

Coincidentally, the loan processor received the 09 and 10 returns hours later, but the 11 return hadn't posted yet. It was faxed / emailed on November 1st and was told it could take up to 6 weeks to be available for transcript. My lender decided to proceed with the contigency that the 11 transcript was available at the time of close. UWing said nothing about an outstanding balance or anything like that.Sweet!

My LO (who knows the whole story) said he had to run the numbers with my monthly payment factored for DTI but I should be just fine since we didn't purchase max budget. He made me send him the IRS agreement letter and said FHA has no problem as long as the arrangement is approved and there are no current liens... the <local government omitted> mortgage that we really want is much pickier and we might not qualify for that. We're already teetering on the lines of a few income thresholds and this definitely doesn't help.

I guess I need to talk to one of these advocates about making sure my 2011 transcript is available in time for close... my tax lawyer/accountant said there was nothing they could do to speed that up.

Re: Under contract, but very worried (IRS / 4056-T form / Streamline agreement)

webhopper — Thu, 29 Nov 2012 17:21:57 GMT

mission wrote:
Update:
Today was my first payment due date on my plan so I called the IRS to make sure they received it since everything is crucial right now. I also mentioned that I made a request via 4506 for return and account transcripts, but would only need the return transcripts (sneaky a little bit?).

Coincidentally, the loan processor received the 09 and 10 returns hours later, but the 11 return hadn't posted yet. It was faxed / emailed on November 1st and was told it could take up to 6 weeks to be available for transcript. My lender decided to proceed with the contigency that the 11 transcript was available at the time of close. UWing said nothing about an outstanding balance or anything like that.Sweet!

My LO (who knows the whole story) said he had to run the numbers with my monthly payment factored for DTI but I should be just fine since we didn't purchase max budget. He made me send him the IRS agreement letter and said FHA has no problem as long as the arrangement is approved and there are no current liens... the <local government omitted> mortgage that we really want is much pickier and we might not qualify for that. We're already teetering on the lines of a few income thresholds and this definitely doesn't help.

I guess I need to talk to one of these advocates about making sure my 2011 transcript is available in time for close... my tax lawyer/accountant said there was nothing they could do to speed that up.

I'm going to cross my fingers that your DTI threshold pans out favorably for you during this process.

Good luck man!

Re: Under contract, but very worried (IRS / 4056-T form / Streamline agreement)

mission — Fri, 30 Nov 2012 05:43:54 GMT

Vlaw - Thank you very much for this. I didn't even know that was an option.

My realtor told me today that we might want to discuss the possibility of a short extension for closing with the seller rather than waiting until the last minute and upsetting them.

I told him about this advocate that I read here and that I would call in the morning to see if we can get my most recent transcript a little sooner... hoping since I've been so cooperative with the IRS during this process that they will give me the benefit of the doubt.

And webhopper, thanks for your support. This is a great place that's provided a lot of hope and knowledge! We get the appraisal back tomorrow, very curious to where it will land since our offer has many pricing contigencies for CC and concessions. Hoping it's huge, but don't mind paying less if it's less.

Re: Under contract, but very worried (IRS / 4056-T form / Streamline agreement)

vlaw1084 — Sat, 01 Dec 2012 11:08:13 GMT

Sorry for the late response, MY local tax advocate was able to get it done within 2 weeks , that is with the actual transcripts processed and 4506-T available. You let them go to work for you and they will, they are truly there to help those in need. :)

Re: Under contract, but very worried (IRS / 4056-T form / Streamline agreement)

Draco007 — Sat, 01 Dec 2012 20:01:56 GMT

Thank you Vlaw. I did as you reccomended this last week and I'm glad I did. The tax advocate assigned to my case called the next day and we overnight mailed a copy of our returns to him to have him expedite the transcripts ASAP. He said we should be able to get this before our orginal estimated close date.

Re: Under contract, but very worried (IRS / 4056-T form / Streamline agreement)

rkb84 — Tue, 04 Dec 2012 19:46:02 GMT

Glad you got the tax advocates to help, I just called and all they said was it takes 8-12 weeks to process. What the hell.. I though they were they ones to call for help with these things?