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B1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns (05/03/2023)

Introduction
This topic contains information on the allowable age of credit documents and federal income tax returns.

Allowable Age of Credit Documents

Credit documents include credit reports and employment, income, and asset documentation. For all mortgage loans (existing and new construction), the credit documents must be no more than four months old on the note date. When consecutive credit documents are in the loan file, the most recent document is used to determine whether it meets the age requirement. For example, when two consecutive monthly bank statements are used to verify a depository asset, the date of the most recent statement must be no more than four months old on the note date. If the credit documents are older than allowed, the lender must update them. For age requirements related to appraisals, see B4-1.2-04, Appraisal Age and Use RequirementsB4-1.2-04, Appraisal Age and Use Requirements. Also see B2-3-05, Properties Affected by a DisasterB2-3-05, Properties Affected by a Disaster for exceptions to the allowable age of credit documents for loans impacted by a natural disaster.

Allowable Age of Federal Income Tax Returns

For some types of sources of income, Fannie Mae requires lenders to obtain copies of federal income tax returns (personal returns and, if applicable, business returns). The “most recent year’s” tax return is defined as the last return scheduled to have been filed with the IRS. For example,

If Today’s Date is.... Then the Most Recent Year’s Tax Return would be...
February 15, 2023 2021
April 16, 2023 2022
December 15, 2023 2022

The following table describes the requirements for documenting the most recent year's tax return based on the application date and disbursement date of the loan. The loan file must always include the last tax return filed by the borrower and the minimum number of years of tax returns required by  B3-3.5-01, Income and Employment Documentation for DUB3-3.5-01, Income and Employment Documentation for DU or as noted in various sections of the Selling Guide for manually underwritten loans.

Application Date Disbursement Date Documentation Required
October 15 1, [current year minus 1] to April 142, current year October 151[current year minus 1] to April 142, current year The most recent year’s tax return is required. The use of a Tax Extension (IRS Form 4868) is not permitted.
April 151, current year to June 30, current year

The most recent year’s tax return is recommended; however, the previous year(s) is also acceptable.

In the event the most recent year's tax return is not obtained, the loan file must include a completed and signed IRS Form 4506-C for transcripts of tax returns provided by the borrower to the lender.
July 1, current year to October 142, current year

The most recent year’s tax return is recommended; however, the previous year(s) is also acceptable.

In the event the most recent year's tax return is not obtained, the lender must perform all of the following:

  • Obtain one of the following documents from the borrower:
    • copy of IRS Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Income Tax Return) filed with the IRS,
    • proof of the e-filing of Form 4868, or 
    • confirmation of electronic payment(s), including the confirmation number, of all or part of the estimated income taxes.
  • Review the total tax liability either reported on IRS Form 4868 or paid by the borrower and compare it with the borrower’s tax liability from the most recent year obtained as a measure of income source stability and continuance. An estimated tax liability that is inconsistent with previous years may make it necessary for the lender to require the current returns in order to proceed.

  • Obtain IRS response from the filing of IRS Form 4506–C confirming that no transcripts are available for the applicable tax year. (Alternatively, lenders may, at their own discretion, rely on borrower-provided evidence that no transcripts are available for applicable tax years when that evidence is obtained directly from the IRS website).

Note: Any documents provided by the borrower must clearly identify the source of information including identifying information in the Internet banner on the document.
April 151, current year to October 142, current year April 151, current year to December 31, current year
January 1, [current year plus 1] to April 142, [current year plus 1] The most recent year’s tax return is required. The use of a Tax Extension (IRS Form 4868) is not permitted.

Exceptions

  • For business tax returns, if the borrower’s business uses a fiscal year (a year ending on the last day of any month except December), the lender may adjust the dates in the above chart to determine what year(s) of business tax returns are required in relation to the application date/disbursement date of the new mortgage loan.

  • For loans with income validated by DU, lenders may rely on the age of tax transcript methodology provided by the service. See  B3-2-02, DU Validation ServiceB3-2-02, DU Validation Service

1

Or the April/October filing dates for the year in question as published or extended by the IRS.

2

Or the day prior to the April/October filing dates for the year in question as published or extended by the IRS.

Recent Related Announcements

The table below provides references to recently issued Announcements that are related to this topic.

Announcements Issue Date
Announcement SEL-2023-04 May 03, 2023
Announcement SEL-2021-11 December 15, 2021
Announcement SEL-2020-07 December 16, 2020
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