Tax Forms

There are several tax forms that you will see in a real estate closing. These include:

1) Tax Authorization Form;

2) Request for Taxpayer Identification Number and Certification ( known as a W-9); and

3) Request for Transcript of Tax Return (known as a 4506-T).

Let's go through them together...

Tax Authorization Form

The Tax Authorization form gives the lender authorization to pay the borrowers property taxes. If the borrower is having money escrowed (sometimes called impound) for taxes, then the lender will contact the county or city tax authority and ask that the bill for taxes be sent to the lender for payment.

In order to do this, the lender needs the permission of the borrower. That is what this form accomplishes.

It will:

* Identify the borrower;

* Identify the address or legal description of the property; and

* Give a mailing address for the tax authority to send the bill.

Sometimes other disclosures are contained in this document, but generally this is the information you will see.

Request for Taxpayer Identification (W-9)

Request for Taxpayer Identification form or W-9 requests that the borrower review his or her tax ID number and certify that it is correct.

The Taxpayer Identification number is usually the borrower social security number. However, if a corporation is purchasing property it may be a Tax Id number for the corporation. Either way, the signer is attesting to the correctness of the number.

These tax forms help protect the lender from fraud. Obviously, the lender needs to make sure it has correct information. Also, any subsequent purchasers of this loan package want to be assured that they have the borrowers valid tax ID number.

Request for Transcript of Tax Return (4506-T)

The Request for Transcript of Tax Return or form 4506-T allows the lender to contact the IRS and obtain a "Transcript" of the borrowers tax filings.

The borrower is agreeing to allow the lender to contact the IRS for this transcript. The transcript is a computer printout of the borrowers tax filings and will show when the borrowers returns are filed. It is not used to obtain a copy of the tax returns themselves, only a computer transcript.

Lenders, and particularly purchasers of the package on the open market, want to be sure the borrower is current in his taxes. Failure to file a return is a sign that there is something financially wrong with the borrower.

Also, if taxes go unpaid, the IRS has agents that will pursue the borrower. The IRS agents have many statutory ways to file liens. The lender does not want to get involved with this process. So the lender likes to keep up with the borrowers tax filings.


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