A taxpayer may have some difficulties understanding their tax transcript or tax return. Knowing the differences between the two can simplify the tax process.
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In this article:
- What Is a Tax Transcript? How About a Tax Return?
- Why Will a Taxpayer Look for a Tax Transcript or Tax Return?
- Tax Transcript Vs Tax Return: How Do They Differ?
- Who Are the Parties Involved with an IRS Tax Return Transcript?
- Where Can a Taxpayer Get a Tax Return Transcript?
Frequently Asked Questions About a Tax Transcript and a Tax Return
What Is a Tax Transcript? How About a Tax Return?
A tax transcript shows the general records of a taxpayer. This record is a concise bird’s eye view of the tax history of a specific taxpayer, who can be an individual or a corporation.
On the other hand, a tax return refers to the forms sent by a taxpayer to report taxes. A tax return can also refer to the request for a tax refund, but usually, a taxpayer refers to a tax return to mean reported tax filings.
A tax return can be:
- A 1040-EZ which is relatively easier to answer. However, using 1040-EZ may lead to some lost tax benefits and deductions, and it also has been recently rendered obsolete.
- The 1040-A, which has some benefits and deductions. However, as of the tax year 2018, taxpayers can no longer use Form 1040-A.
- A Form 1040, which is what most taxpayers now use due to the cancellation of 1040-A.
Each tax form has its own qualifications before a taxpayer can use them. For the taxpayer hoping to get a tax return for 2017 or earlier, they can still ask for the old 1040-EZ or 1040-A.
However, moving forward, virtually all tax returns are filed as a Form 1040.
These tax returns are relatively straightforward to read and answer. However, if there are some complex issues like a tax lien, talking to a tax advocate specialist can help.
Generally speaking, a tax return has more details than a tax transcript. However, some taxpayers may prefer to send a tax transcript instead of a tax return for their privacy.
Why Will a Taxpayer Look for a Tax Transcript or Tax Return?
Usually, a taxpayer requests for a tax return due to:
- Application for a bank loan
- Enrollment in a scholarship for working students (to find income bracket qualification)
- Getting a Mortgage, whether for a home, car, or other assets
- Legal reasons (ongoing case)
- Application for tax benefits, whether from the state or federal government
However, some taxpayers opt to use a tax transcript for:
- Small personal loans, usually from a credit union
- Proof of finances
- Refinancing of loans
Of course, the taxpayer can opt to get either the tax return or tax transcript. Asking for one does not bar the taxpayer from requesting for a copy of the other.
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Tax Transcript Vs Tax Return: How Do They Differ?
The main difference lies in the specificity of information, costs, and length of time allowed for reporting.
A tax return:
- Shows the critical tax information (filed income, expenses, etc.);
- May show sensitive information (Social Security number, home address, and other personal information);
- Shows specific amounts for deductibles and benefits as well as fees and penalties;
- Can take around 60 days for the taxpayer to receive one via mail;
- Generally costs approximately $50, $57 for previous tax returns, on each tax return for the IRS to process the tax return to the taxpayer; and
- The taxpayer can apply for the current year and the previous six tax years.
On the other hand, a tax transcript:
- Mainly mentions the total tax filed as an aggregate, with no or minimal listed details;
- Does not usually show sensitive information;
- Usually does not show a specific amount for deductibles and fees;
- Can take 30 days to arrive if requested via mail. Processing can take 5 to 10 business days via online or over the phone;
- Generally does not show any changes to information made by the taxpayer on the previous tax filings. However, a taxpayer can request a different kind of tax transcript which may show updated information;
- Usually does not cost anything to file (as of August 2019); and
- The IRS can only provide the current year and up until three previous tax years.
There are two main kinds of a tax transcript.
The first kind, named a tax return transcript, is what most taxpayers ask for from the IRS when they mean tax transcript.
In this document, the taxpayer can see:
- The taxable income for the tax year
- What kind of tax return (1040-a, 1040-EZ, 1040) the taxpayer used
- Marital status
- The adjusted gross income, which is the total gross income minus specific tax deductions
The more detailed tax transcript is called the tax account transcript.
The tax account transcript has:
- Records of up to 10 years, unlike the usual tax transcript of six years
- Updates and changes in the original tax filings. The common tax return transcript only shows the original tax file.
- What the tax return transcript shows (marital status, adjusted gross income, taxable income and what form the taxpayer uses)
- Additional important tax information. This applies especially to taxpayers who pay taxes using the estimated taxes system.
Who Are the Parties Involved with an IRS Tax Return Transcript?
Usually, only the taxpayer can apply for an IRS tax transcript or tax return.
However, there are a few ways for a third party to acquire one:
- Getting a court order for the tax transcripts or returns
- Undergoing a tax audit
- A lender or institution with written consent from the taxpayer
- An individual with a financial power of attorney
If a taxpayer is not comfortable sharing the tax transcript or return, he or she can always reject and offer a different financial document.
For example, a taxpayer can send a credit report or personal copies of filed tax returns. Of course, the lender may ask for more clarifying documents, but a taxpayer may prefer sending other paperwork as a mailed tax return may take 75 days before arriving.
Where Can a Taxpayer Get a Tax Return Transcript?
For a tax transcript:
- A taxpayer can order a transcript via phone, using 800-908-9946. Simply follow the voice prompts and the taxpayer can expect the tax transcript within 5 to 10 business days.
- For mail, a taxpayer should use Form 4506T-EZ. The form only has one page to fill in, and the taxpayer can expect a turn-around time of 30 days.
- A taxpayer can also get one via the IRS Get Transcript portal.
For those looking for a tax return, he or she can use Form 4506 by downloading and printing the form and then mailing or faxing it to the IRS.
The taxpayer can expect a copy within 75 days via mail.
Also, do note that a taxpayer is expected to hold on to their tax return copies for three years. By properly storing both a paper and digital tax return sent to the IRS, a taxpayer may no longer need to ask for a tax return and pay the $50 to $57 fee.
A tax transcript usually accomplishes what a lender asks for. In the event that there is outdated information in the tax transcript, a taxpayer may want to either file for a tax account transcript or a tax return.
Do you have questions about your tax transcript? How about your tax return? Lets us discuss in the comments section below.
If you owe back taxes, visit taxreliefcenter.org for more information on tax relief options.
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