IRS form 4506-C FAQ
Disclaimer
This information is not a replacement or substitute for the requirements in the Freddie Mac Single-Family Seller/Servicer Guide and other Purchase Documents.
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What should the Seller’s Quality Control do when the 4506-C request for tax information is rejected by the Internal Revenue Service (IRS)?
Reason for IRS Rejection Possible Cause and Action to Take Identity Theft Indicator - Additional steps need to be taken to confirm the borrower’s identity
- If the borrower’s identity cannot be reasonably determined this may be an indication of possible fraud and should be reported to Freddie Mac as required by Guide Section 3201.2
IRS has no record on file for the taxpayer - If the loan file contains copies of tax returns, this may be an indication of possible fraud and should be reported to Freddie Mac as required by Guide Section 3201.2
Missing information or errors in completing the 4506-C - Determine if there is a systemic issue with the preparation of this form that is resulting in rejects. Systemic issues should be addressed and resolved.
- The Seller is not required to report these rejections on a loan-by-loan basis to Freddie Mac under Guide Section 3402.10 if the Seller determines that the findings do not affect the eligibility of a mortgage sold to Freddie Mac.
Incorrect form version - If the signed IRS Form 4506-C was the correct form version at the time it was signed by the borrower and subsequently the Seller’s QC is unable to use the form to obtain tax information from the IRS as required in Guide Section 3402.5(a)(ii) because of an IRS form change, the Seller will not be penalized for being unable to reverify the income during the post-closing QC review process.
- The Seller is not required to report these rejections on a loan-by-loan basis to Freddie Mac under Guide Section 3402.10 if the Seller determines that the findings do not affect the eligibility of a mortgage sold to Freddie Mac.