How can the 2020 IRS Tax Filing Extension Date affect your USDA qualifying?
How does the May 17, 2021 federal tax filing extension date impact USDA home loan qualifying, closing dates, and the required documentation?
As we all know, USDA Rural Home Loan eligibility requires USDA loan income verification during the mortgage process. In today’s short video, I will explain the IRS tax return documentation needed and review the key dates to be aware of in order to keep your transaction on schedule!
Remember, if you need help or a have question that is what we are here for! Just call or email to discuss your scenario because we are known for returning calls, replying to emails, and responding to your messages. Now, wouldn’t it be nice if everyone did that!
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When the U.S. Treasury Department and the Internal Revenue Service announced special relief to individuals and businesses in response to the COVID-19 outbreak, this included an extension of the filing and payment deadlines for 2020 tax returns to May 17, 2021.
It is important to understand how this federal tax deadline extension can impact your closing date and the paperwork required for your USDA Home Loan. One of the major impacts the federal extension date has on loan documentation relates to which year’s federal tax returns are required as well as the timing needed to obtain IRS transcripts.
What is an IRS Tax Return Transcript?
Per IRS.gov, “A transcript summarizes return information and includes Adjusted Gross Income (AGI). They are available for the most current tax year after the IRS has processed the return. People can also get them for the past three years. When applying for home mortgages or college financial aid, transcripts are often necessary.”
This is important because USDA guidelines state that “IRS transcripts are required for all required household members” and because the IRS transcripts are not immediately available, this can affect your closing date.
How long does it take to receive IRS transcripts?
Additionally, IRS.Gov states that the “IRS’s return processing takes from 2 to 4 weeks before a transcript becomes available. If you mailed your tax return, it takes about 6 weeks.”
Further, because we have to verify income from the most recent two years, the following dates would apply:
If today’s closing date is… Then the most recent two years of tax returns would be:
- May 14, 2021 2018 and 2019
- May 18, 2021 2019 and 2020
Additionally, be prepared to document any income that is not supported by tax returns through a year-to-date profit and loss statement (“P&L”). For example, if you were to close your loan prior to May 18, 2021, then a year-to-date P&L would be required for 2020 full tax year and 2021 year-to-date.
Please note that our topic today did not cover tax return extension dates beyond this time period, but if you do have separate questions on the required documentation for IRS Tax Return extensions, please contact us for further details.
Remember, do not let the details overwhelm you because that is what we are here for! As a USDA Approved Lender, we will walk you through the USDA loan qualifying process step-by-step. Just call or email to discuss your scenario and let us show you the “Metroplex” difference!
(800) 806-9836 Ext. 280
I want everyone to make it a great day, and look forward to seeing you right here for the next tip of the week!