Taxes, everyone’s favorite topic! I know what you are thinking right now, isn’t it too soon to talk about income taxes?
If you want to buy a new home, buy an investment property, buy a vacation home, or refinance your home in 2018 and you own a business; whether you file a business return or a Schedule C, or are a 1099 contractor or earn commissions, tips, etc. it is not too early.
Most people’s goals are to show as little income as possible to avoid paying a large amount of taxes to the IRS each year. CPA’s do a great job of this. When it comes to buying or refinancing your home, however, this strategy can backfire. 
Nowadays, taxes must be disclosed when you take out a mortgage on a property, in addition the taxes supplied will be verified through the IRS to ensure the taxes given to us, your lender, are the taxes that were filed with the IRS via “transcripts.” This is done to obviously prevent from using fraudulent tax returns when taking out a mortgage.
Now, being self-employed, a 1099 contractor, or someone who receives commissions or tips, does not disqualify you from buying or refinancing a home, and the process is not harder than if you were a salaried W-2 employee. What you need are strategies, before doing your taxes for 2018. Consult with a local mortgage professional, and look at your financial picture and plan before you file taxes. Taxes owed to the IRS must be paid in full at the closing of your home, or as an alternative you can enter into an IRS installment agreement and make one to three payments toward the plan and close your home. The time frame for how many payments will be loan-product specific.
There are many write-offs on your taxes that as lenders can “add back” to your income. Unfortunately, there are way too many “professionals” in the field that do not know how to fully digest tax returns and this leads to many business owners, 1099 contractors and others, being denied for a loan when, in actuality, you can buy.
Don’t give up, do not think just because you are self-employed, a 1099 contractor, etc., that you cannot buy a home. You can. The key is to plan. Plan now so that you will not put yourself in a bad spot and the pressure is on.
By Jay White. Jay was named to Mortgage Executive magazine’s 2016 list of “Top 1 Percent Mortgage Originators in America.” He was president of Acworth Business Association in 2014 and 2015. He currently serves on the ABA board, and the boards of North Cobb Rotary Club and Acworth Tourism.
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