Most every borrower will now be required to complete and sign the Tax Transcript form(4506) when they apply for a mortgage loan. While this requirement is not a new one, borrowers should be made aware that this form will now be sent to the IRS during your application process.
The Tax Transcript form, which checks the past two years of federal tax returns, verifies to the lender that the income given to them is accurate. The IRS then confirms the information or alerts the lender to a discrepancy. In the case of a discrepancy, the lender is given copies of the Taxes on file with the IRS.
For the borrower who is honest and submits accurate tax returns to the lender, this process should not be an issue or cause for concern. It does have implications however, for those who submit false tax returns.