Buyer's Bank Asking For Seller's 1040 Through 4506-T... Weird?

[Allen Chu]

A friend is about to enter escrow as the seller in a business&commercial property sale. The buyer has already submitted the earnest money and signed the escrow documents. The seller is in the process of reviewing and signing the escrow documents to officially open escrow.

Then today, the buyer's bank contacted the seller asking to fill out an IRS form 4506-T requesting the seller's 1040 tax return transcript for the past 3 years from the IRS. The seller has already provided soft copies of the 1040 to the bank but with social security numbers and other personal information blurred out.

The question is... why does the bank need the sellers 1040 from IRS? I looked up the 4506-T document and usually, the banks only request this from the buyer who is applying for the loan. Is it odd that the bank is requesting this document from the seller? I understand if the bank is trying to verify that the soft copies of the 1040 (already provided by the seller) are unmodified, but this seems to be putting the seller in a situation where they are being forced to disclose too much personal information unrelated to the sale of the business/property... Also, how can the seller be sure of the legitimacy of this "bank"??

Does anyone have any experience with this? Is this a valid request by the buyer's bank?

Any advice is truly appreciated. Thanks in advance!

[Account Closed]

Originally posted by @Allen Chu:

A friend is about to enter escrow as the seller in a business&commercial property sale. The buyer has already submitted the earnest money and signed the escrow documents. The seller is in the process of reviewing and signing the escrow documents to officially open escrow.

Then today, the buyer's bank contacted the seller asking to fill out an IRS form 4506-T requesting the seller's 1040 tax return transcript for the past 3 years from the IRS. The seller has already provided soft copies of the 1040 to the bank but with social security numbers and other personal information blurred out.

The question is... why does the bank need the sellers 1040 from IRS? I looked up the 4506-T document and usually, the banks only request this from the buyer who is applying for the loan. Is it odd that the bank is requesting this document from the seller? I understand if the bank is trying to verify that the soft copies of the 1040 (already provided by the seller) are unmodified, but this seems to be putting the seller in a situation where they are being forced to disclose too much personal information unrelated to the sale of the business/property... Also, how can the seller be sure of the legitimacy of this "bank"??

Does anyone have any experience with this? Is this a valid request by the buyer's bank?

Any advice is truly appreciated. Thanks in advance!

It;'s very odd to my experience. When I was a loan officer, we never requested a 4506-T from the seller. It is immaterial. I'd question it and have a conversation with the bank. It's likely they have confused who the seller and who the buyer are. Personally as a seller, I'd refuse.