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Housing programs, tax credits, and the value of the 4506-T

In states that provide tax incentives for investors in subsidized housing, property managers face additional hurdles hurdles that may be overcome with a 4506-T.

What are the typical hurdles? We talked to a California property management firm to find out why they execute 4506-T forms. We found they get tax transcripts for a number of reasons that stem from the state's tax credit program.

The firm told us it initially asks the resident or applicant to provide a copy of their tax return, and executes a 4506-T when the return isn't available. The firm, which manages tens of thousands of units in California, gets tax return information in order to ensure the investors get those tax credits. We learned there are four distinct cases in which a property manager would get a tax return or execute a 4506-T to satisfy the requirements of a tax credit program:

  • To verify whether an applicant has filed taxes.
  • To establish cash paid employment.
  • To prove a minor is a dependent, if the applicant is claiming a minor as part of the household.
  • To prove a member of the household is a dependent if the member is over 18 years old and a full time student. This is important because the first $480 of earnings the student has is excluded from the income calculation for the tax credit program.

In speaking with this California property manager, we also discovered that there is value in the 4506-T even when the tax credit program isn't an issue. For example, if the applicant has a new job and can't provide the required number of check stubs, a manager may ask for a return or execute a 4506-T to get the most recent tax return.

For housing agencies and property managers, getting the full picture of an applicant's total income has never been easier. Executing a 4506-T (signed electronically or with a pen) is fast and efficient and gives you access to income data from the IRS, including non-employment income. To learn more about how we can help streamline the process, contact us at govinfo@theworknumber.com.

Newsletter: May 2016

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