What IRS Form 4506-C Does and Why You Need It
IRS Form 4506-C gives your lender permission to request copies of your tax transcripts directly from the IRS. This is not about getting your tax returns during the application process — it's about quality control after your loan closes.
Think of it as an insurance policy for your lender. After closing, they may need to verify that the tax documents you provided during underwriting match what the IRS actually has on file. This protects both you and the lender from fraud and ensures loan quality.
Say you're a W-2 employee who also has rental income from an investment property. You'll sign one Form 4506-C that covers your personal tax returns (Form 1040) for the years your lender used to qualify your income. If you're self-employed and provided both personal and business tax returns, you'll sign two separate forms — one for your 1040s and another for your business returns.
When You Must Sign the Form
You must sign Form 4506-C at or before your loan closing. Your lender cannot close your loan without this signed authorization from every borrower whose income was used for qualification.
There are two exceptions to this rule. First, if your lender already obtained tax transcripts before closing and used them to verify your income during underwriting, you don't need to sign an additional form. Second, if all your income was validated through Fannie Mae's automated DU validation service, no 4506-C is required.
The form stays valid for 120 days after you sign it. If your closing gets delayed beyond that timeframe, you'll need to sign a new one.
How Many Forms You'll Need to Sign
The number of forms depends on the types of tax returns your lender used to verify your income. Each Form 4506-C can request transcripts for up to four tax years, but only for one type of tax form.
Here's how it works in practice. If you're a salaried employee and your lender only needed your personal tax returns (Form 1040) for 2022 and 2023, you'll sign one Form 4506-C. If you're self-employed and provided two years of personal returns plus two years of business returns (Form 1120S), you'll sign two separate forms.
The same applies if you have rental properties. Your personal returns go on one form, and if your lender needed separate business entity returns for your rental LLC, those require a second form.
What Information Goes on the Form
Your lender fills out most of the form before you sign it. They'll list themselves (or their loan servicer) as the recipient of the tax documents, specify which tax years they need, and indicate what type of tax forms they're requesting.
The form must be dated with the actual date you sign it. Don't sign a blank or partially completed form — everything should be filled in before you put your signature on it.
For borrowers in Puerto Rico, you'll use a different form called Modelo SC 2907 instead of the standard IRS Form 4506-C. Other U.S. territories have their own equivalent forms.
Special Situations and Exceptions
If you're self-employed and Fannie Mae's DU validation service confirmed your Schedule C income, your lender may not need the actual tax returns. In this case, they might accept tax transcripts instead, which could change what goes on your Form 4506-C.
Some borrowers worry about signing this form because they think it gives the lender unlimited access to their tax information. It doesn't. The form is specific to the tax years and form types your lender needs for your particular loan.
If your lender requests transcripts before closing and finds discrepancies between what you provided and what the IRS shows, they'll need to document and resolve those differences before your loan can close.
What Happens After You Sign
Your lender keeps the signed Form 4506-C in your loan file. They may submit it to the IRS immediately, or they may wait and use it later as part of their quality control process after closing.
If they do request transcripts, those documents also become part of your permanent loan file. Any discrepancies between your original tax documents and the IRS transcripts must be explained and documented.
The form and any resulting tax transcripts stay in your loan file for the life of the loan. This is required for quality control reviews and potential audits.
Common Problems to Avoid
Don't sign the form until your lender has completely filled it out. Some borrowers sign blank forms thinking they're being helpful, but this creates problems later when the lender needs to specify exact tax years and form types.
Make sure the tax years on the form match the years your lender actually used for income verification. If they qualified you using 2022 and 2023 tax returns, but the form requests 2021 and 2022, that's a problem that needs fixing.
If you filed amended returns for any of the years listed on the form, tell your lender. The IRS transcripts will show the amended information, which might not match your original returns.
References
For the official guidelines, see B3-3.1-06: Requirements and Uses of IRS IVES Request for Transcript of Tax Return Form 4506-C in the Fannie Mae Selling Guide.
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Original Fannie Mae Guideline Text
B3-3.1-06, Requirements and Uses of IRS IVES Request for Transcript of Tax Return Form 4506-C (12/16/2020)
Use of IRS Form 4506-C to Validate Borrower Income Documentation
Use of IRS Forms to Obtain Federal Income Tax Information
Completing and Submitting the IRS Authorization Form
Retaining the Tax Documents
Use of IRS Form 4506-C to Validate Borrower Income Documentation
Fannie Mae requires lenders to have each borrower whose income (regardless of income source) is used to qualify for the loan to complete and sign a separate IRS Form 4506-C at or before closing. An alternative form or process is also acceptable if it authorizes the release of comparable tax information from the IRS. As noted below, it may be necessary to have the borrower complete and sign multiple IRS Form 4506-Cs depending on the transcripts required to validate the income.
Note: Borrowers with income from Puerto Rico must use Modelo SC 2907 (Solicitud De Copia De Planilla, Relevo De Herencia Y De Donacion) rather than IRS Form 4506-C. Applicable forms or processes for eligible borrowers filing tax returns in other U.S. territories must be adhered to and obtained when required.
In addition, the lender must document the requirement to obtain tax transcripts by submitting the IRS Form 4506–C to the IRS (directly or through an authorized designee) in their written quality control (QC) plan. See D1-3-03, Lender Post-Closing Quality Control Reverifications for details concerning QC requirements.
If the lender submits the IRS Form 4506–C to the IRS prior to closing, the transcript(s) must be used to validate the income documentation provided by the borrower and used in the underwriting process. In this case, because the lender has already received the tax transcript(s), an additional signed IRS Form 4506-C is not required to be signed by the borrower.
When all of a borrower’s income is validated by the DU validation service, the lender is not required to obtain a signed IRS Form 4506–C for that borrower.
Use of IRS Forms to Obtain Federal Income Tax Information
When federal income tax information is used to document income for qualifying purposes, the lender may obtain transcripts of the applicable federal income tax documents. For example, the lender may obtain Tax Return Transcripts for Form 1040 or Wage and Income Transcripts for W2s, 1098s, and 1099s. However, in certain instances, copies of the actual returns, schedules, or forms are needed because the tax return transcripts will not provide the detail required to qualify the borrower. For example, the lender must obtain copies of Schedules B through F, Schedule K-1, or business returns. These schedules or forms are not required if:
the income reflected on the applicable schedule transcripts is positive, and
the income supported by that schedule or form is not being used for qualifying.
If a borrower’s self-employment income from a sole proprietorship (as reported on IRS Form 1040, Schedule C or C-EZ) is validated by the DU validation service, lenders are not required to obtain the tax returns. Documentation in accordance with the DU message is acceptable. The DU message may allow a tax transcript rather than the tax returns. See B3-2-02, DU Validation Service, for additional information.
Completing and Submitting the IRS Authorization Form
IRS Form 4506-C can be used to obtain transcripts for up to four years or tax periods but only one tax form number can be requested per each IRS Form 4506-C. For example, it is necessary to complete two IRS Form 4506-Cs for a self-employed borrower whose income documentation includes both two years of personal tax returns and two years of business tax returns. One IRS Form 4506-C will be required to obtain a transcript of the personal 1040 returns and another will be required for the business returns (Form 1065, Form 1120, Form 1120A, etc.).
Lenders must
fill in as the recipient of the tax documents — either its name or the name of the servicer, if servicing will be transferred within 120 days of the taxpayer signing the form;
indicate that the request is for documentation concerning the year or years for which the borrower’s income was or will be used in underwriting the loan; and
date the form(s) with the date on which the borrower signs the form (or ascertain that the borrower dates the form when they sign it).
IRS Form 4506-C is valid for 120 days after completion (including signature) by the borrower.
Note: The borrower should not be required to sign an IRS authorization form before all items on the form, including the transcript being requested, the years/tax periods, and the date, have been completed.
Retaining the Tax Documents
All tax documents, including either the IRS Form 4506-C or the tax transcript(s) received from the IRS, and any subsequent explanation or documentation of discrepancies must be retained in the loan file for QC review.
