{"id":3404,"date":"2016-04-08T11:01:13","date_gmt":"2016-04-08T11:01:13","guid":{"rendered":"http:\/\/teammovemortgage.com\/?p=3404"},"modified":"2020-07-13T22:33:17","modified_gmt":"2020-07-13T22:33:17","slug":"tax-return-issues-that-can-cause-delays-or-denials-when-buying-a-home","status":"publish","type":"post","link":"https:\/\/teammovemortgage.com\/blog\/tax-return-issues-that-can-cause-delays-or-denials-when-buying-a-home\/","title":{"rendered":"Tax Return Issues That Can Cause Delays or Denials When Buying a Home"},"content":{"rendered":"

Tax Return Issues are Rampant in Mortgage Lending<\/h1>\n

Tax Returns & the IRS Validation of the Returns Can Cause Closing Delays or Even Unexpected Loan Denials!<\/strong><\/h2>\n
Most think that mortgage loans are as simple as providing a tax return that shows an income and the mortgage income verification is done.\u00a0 This couldn’t be further from what actually happens in the background which mortgage lenders are required by laws, lending agencies such as FHA, and\/or by investors.\u00a0 A sampling of the\u00a0things lenders are looking for that have to do with tax returns are as follows:<\/div>\n
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  1. Tax return transcripts from the IRS<\/strong>:\u00a0 This is to verify that the tax returns provided are the actual ones provided to\"mortgage the lender<\/li>\n
  2. W2 transcripts<\/strong>:\u00a0 This verifies the W2’s provided are the actual ones<\/li>\n
  3. Income tax debts owed<\/strong>:\u00a0 If money was owed on the most recent tax return, it could still be a potential outstanding lien or payment<\/li>\n
  4. Additional business losses<\/strong>:\u00a0 There could be a business that has losses and could reduce the borrower’s total income<\/li>\n
  5. Tax returns are actually filed<\/strong>:\u00a0 We have had a couple recently where borrowers provided tax returns for previous years that were never filed.\u00a0 This would never work because the tax returns could be change or never even get filed<\/li>\n
  6. Extra properties that are owned<\/strong>:\u00a0 If the borrower is using a first time buyer product, there can’t be other properties listed or mortgage interest reported.\u00a0 Always disclose property you own<\/li>\n
  7. Unreimbursed employee expenses<\/strong>:\u00a0 If a borrower is commissioned income\u00a0accounting for over 25%\u00a0and there are unreimbursed employee expenses written off, it could lower the qualifying income<\/li>\n
  8. Business expenses paid by the business<\/strong>:\u00a0 Some products require that the tax returns show the debt being written off by the business to exclude the debt from debt ratios<\/li>\n
  9. Determining nontaxable income<\/strong>:\u00a0 Some sources of income are nontaxable and to gross up the income, it must be shown as nontaxable income on the returns or some cases not shown on the returns if allowed<\/li>\n
  10. And of course a good thing<\/strong>, trying to find any income that can be counted for the borrower<\/li>\n<\/ol>\n

    Most popular tax return issues that can delay a closing<\/h2>\n

    Here are some examples we have seen lately:<\/strong><\/em><\/p>\n

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    1. Borrowers providing tax returns that have not even been filed with the IRS<\/strong> – mentioned above.\u00a0 This is mortgage \"taxfraud so don’t try this!<\/li>\n
    2. Income taxes not paid for previous years creating liens or payments<\/strong> – These could be required to be paid off or if a buyer is making payments, they may not be required to be paid off<\/li>\n
    3. IRS or State Tax payments that must be counted in the buyer’s debt ratio<\/strong> – borrowers that don’t disclose this up-front could cause this not to be known until bank statements are received and reviewed<\/li>\n
    4. IRS rejecting tax transcript requests because of identity theft<\/strong> – Identity thieves have been stealing tax payer social security numbers and tax refunds at an alarming rate<\/li>\n
    5. Amending or just recently filing 2014 or earlier tax returns that do not show up with the IRS transcripts yet<\/strong> – Borrowers should mention up-front if there has been an amended return<\/li>\n<\/ol>\n
      We get the argument a lot from borrowers that this should not matter but most do not realize the amount of fraud or mistakes that are on tax returns and that is why lenders have to obtain transcripts of tax returns to close a mortgage loan in many circumstances.<\/div>\n
      <\/div>\n
      So to avoid delays or issues late in the process, it is best to provide all documentation requested at once and up-front.\u00a0 Then it can be reviewed, accurate income and debt ratios\u00a0calculated, and have more confidence later in the process.<\/div>\n
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      Plus, We are Tax Return Experts<\/strong><\/span><\/div>\n
      <\/div>\n
      Related Resources:<\/strong><\/div>\n