Have you ever heard your CPA mention a “tax transcript”? Do you find yourself momentarily reminiscing about your college days, wondering how a “transcript” will benefit you? The quick answer is that a tax transcript is a tax record, either physical or virtual, of your past tax returns. Keeping a copy of your original tax returns for the last few years is ideal, but if you’ve lost those forms or don’t have them on hand, consider requesting a transcript of your taxes from the IRS rather than your filed returns. You can request a transcript directly from the IRS website or by calling 800-908-9946 and then decide whether you’d like to receive them through the US mail or via email.

When Do You Need One?

Your IRS transcripts are helpful when applying for loans, such as a new mortgage, for financial aid for college through Federal Student Aid (FAFSA), or for applying for federal healthcare programs, such as Medicaid. IRS transcripts contain most of the line items on your official return. You can request either this year’s transcript or any of the past three years absolutely free. This is advantageous, as a copy of one of your filed tax returns could cost you about $50 per year. It’s always a best practice to keep the last seven years of returns for your records, but more on that later.

Transcripts are also a “trade tool” that CPA’s regularly use for any new (or disorganized) clients to find out what tax forms the client was issued. They also help to understand any tax notices.

What’s On an IRS Transcript?

There are a few options when it comes to requesting an IRS transcript. You can request a tax return transcript, a tax account transcript, or a record of account transcript.

Tax Return Transcript – This transcript contains most of the line items off your tax return as filed, but will not highlight changes or amendments made by you or your CPA after your return had been originally filed. This includes Form 1040, 1040A, and 1040EZ, along with any other schedules and forms.

Tax Account Transcript – This transcript will show the adjustments made to your tax returns after you’ve originally filed, whether by yourself, your CPA, or the IRS itself. This document will give marital status, adjusted gross income, taxable income, what type of return was filed, as well as any other basic information about your return.

Record of Account Transcript – This transcript combines the tax return and tax account documents.

Wage and Income Transcript – This version shows data reported to the IRS, on forms reporting sources like a W-2 (employee wages and taxes withheld for the year), a 1099-NEC (a form proving payments from an individual that is not an employer—freelance work/independent contractors), and a 5498 (a form that shows annual contributions to an IRA). A word of caution the prior years records are often not populated until May of the subsequent year, making it a more viable tool for those who filed extensions.

Will My Transcript Tell Me When to Expect My Refund?

No. Tax return transcripts are usually only needed to validate your past income within the last few years, as well as to help you or your CPA with tax preparation. There is no correlation between the codes on the transcript and when you’ll receive your refund. If you’d like to check the status of your refund, you can inquire directly at IRS.gov.

Your Tax Transcript is Not a Copy of Your Tax Return

It’s important to note that your tax return transcript differs from a copy of your tax return. To obtain a copy of an original tax return, you must file the IRS Form 4506 along with the fee for the official copy. It can take up to seventy-five days before you receive a copy of your return, which is why requesting a transcript for free is the quicker and easier option.

At Organized Instincts, our seasoned team of daily money managers will help you better understand your tax transcripts and how your CPA utilizes them. Schedule a conversation today and learn how our team makes tax season easy.