How to Amend Tax Returns to Close on a Mortgage

Once you've reached the closing stage of the mortgage process, the loan terms are pretty much set in stone. However, filing an amended tax return can slow the process way down, and any financial changes reflected in the amendment may disqualify you for the loan. Lenders usually pull tax transcripts directly from the IRS database to cut down on fraud, but the IRS takes eight to 12 weeks to process amended returns, possibly delaying closing for months.

Step 1

Contact your lender. Tell them you are amending your tax returns and give the reason why. You should also mention the eight- to 12-week processing time frame so the lender can adjust accordingly.

Step 2

Gather the paperwork you need to amend your return. This includes a copy of the previous tax return, income documentation and receipts for deductible expenses.

Step 3

Download Form 1040X from the IRS website, or call the IRS to request one. You need a program such as Adobe Reader to view and fill out the form on your computer.

Step 4

Check the appropriate box at the top of the form to indicate the year of the tax return you are amending or, if you are amending a return that is more than three years old, write it in the space provided below the check boxes.

Step 5

Fill out the first section of the form with your name, Social Security number, spouse's name and Social Security number, address, phone number and filing status.

Step 6

Enter any changes to your income, deductions, taxes paid and credits in the second section of the form. If you are changing your exemptions, complete Part One of page two and enter that amount on the appropriate line of the "Income and Deductions" part of the section. Perform the necessary calculations to determine your additional taxes or refund.

Step 7

Include an explanation of the changes you made in Part Three, on the second page. Make sure the reasons for the changes are clear and comprehensive but keep the explanation concise. Simple statements such as, "I forgot to include a student loan interest deduction" will suffice.

Step 8

Mail the form to the IRS office in your area and include a check or money order for any taxes owed. If you cannot pay the total amount when you file, go to the IRS website to fill out an installment agreement request online.

Step 9

Give a copy of the amended return to your lender along with a copy of any cancelled checks or payment plan agreements. The lender will need to see these documents before you can close. Keep in mind that installment plan payments will factor into your debt to income ratio and may affect the loan amount you qualify for.

Tip

  • Using a professional tax preparer or tax accountant to complete and file the amended return not only reduces the risk of mistakes, the professional's signature can help serve as authoritative verification of the change if the lender wants to see a copy of the return before the IRS processes it. If the changes are simple or fairly inconsequential, such as if you are receiving an additional refund, the lender may even agree to accept a copy of the signed return and let you continue to closing.

Photo Credits

  • Thinkstock/Comstock/Getty Images

About the Author

Lauren Treadwell studied finance at Western Governors University and is an associate of the National Association of Personal Financial Advisors. Treadwell provides content to a number of prominent organizations, including Wise Bread, FindLaw and Discover Financial. As a high school student, she offered financial literacy lessons to fellow students.

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