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Started By
Message
re: To deduct or not to deduct, that is the question.
Posted on 12/15/15 at 12:12 pm to Napoleon
Posted on 12/15/15 at 12:12 pm to Napoleon
It's a message board, man. I'm here for a discussion. Why else would you post this? Just to have people agree with you to make yourself feel better?
I'm trying to keep you out of trouble.
ETA: I just went through this process. Itemized deductions were never brought up throughout the process, just FYI.
I'm trying to keep you out of trouble.
ETA: I just went through this process. Itemized deductions were never brought up throughout the process, just FYI.
This post was edited on 12/15/15 at 12:15 pm
Posted on 12/15/15 at 12:18 pm to TheOcean
That's what the SO thinks. I'm going to wait until I finish up this month and play around with the numbers a bit. I personally want to pay the IRS as little as possible (as allowed by laws within all framework of legality)
Just it hit me that the declining income was bad, but if the net income is still a good amount, and it goes up this year then it will no longer be declining anyway and we already made a good bit more this year than last with less expenses.
Just figured I would ask here because like one person said earlier. "I want to appear poor to the taxman, but not the Banks".
I think going to my bank next is a great idea.
I'm really just feeling things out, probably won't look to buy until after Summer anyway.
Just it hit me that the declining income was bad, but if the net income is still a good amount, and it goes up this year then it will no longer be declining anyway and we already made a good bit more this year than last with less expenses.
Just figured I would ask here because like one person said earlier. "I want to appear poor to the taxman, but not the Banks".
I think going to my bank next is a great idea.
I'm really just feeling things out, probably won't look to buy until after Summer anyway.
Posted on 12/15/15 at 12:19 pm to Napoleon
then if you don't claim them you are misrepresenting your income to the bank
Posted on 12/15/15 at 12:23 pm to Napoleon
quote:
I'm in a service repair field and a lot of expenses are parts. I have to claim that.
Parts aren't a deduction. That's cost of goods sold. That is something you could never get back as income. Perhaps I misinterpreted the intent of the statement above.
P.S. I'm glad your business is doing well. This hasn't been our best year but it has forced us outside our comfort zone and we'll benefit in the coming years because of it.
This post was edited on 12/15/15 at 12:25 pm
Posted on 12/15/15 at 12:51 pm to Napoleon
Like I said before, it comes down to affordability.
There are a lot of crappy lenders out there who will look at a decline in net income, and freak out. Even if you can qualify just fine with the lower income number.
A good mortgage specialist with experience in dealing with small businesses will look past the tax returns, look into the business, and actually see what is really happening.
But understand this: If you are taking your legitimate deductions, and that nets you say, 80K per year, but the house you want requires you to net 95K a year, you really need to think about your affordability. Yeah, you can not claim 15K in those sort of "mixed" deductions, but you are still spending the money. You still only have 80K.
You might be able to get the loan, but I'm more concerned about your finances. If you are that much on the edge that a few thousand is the difference between approval and denial, that's a bigger issue to look at.
Again, a good mortgage officer who works with small biz owners will help you figure out what the real problem is.
There are a lot of crappy lenders out there who will look at a decline in net income, and freak out. Even if you can qualify just fine with the lower income number.
A good mortgage specialist with experience in dealing with small businesses will look past the tax returns, look into the business, and actually see what is really happening.
But understand this: If you are taking your legitimate deductions, and that nets you say, 80K per year, but the house you want requires you to net 95K a year, you really need to think about your affordability. Yeah, you can not claim 15K in those sort of "mixed" deductions, but you are still spending the money. You still only have 80K.
You might be able to get the loan, but I'm more concerned about your finances. If you are that much on the edge that a few thousand is the difference between approval and denial, that's a bigger issue to look at.
Again, a good mortgage officer who works with small biz owners will help you figure out what the real problem is.
Posted on 12/15/15 at 1:09 pm to Napoleon
This whole thread is a prime example of first world problems
Posted on 12/15/15 at 1:32 pm to krehn11
If you are a mortgage originator, you are sort of proving his point
amending returns isnt fraud
falsifying information or documents is fraud
DISTINCT difference
amending returns isnt fraud
falsifying information or documents is fraud
DISTINCT difference
Posted on 12/15/15 at 1:47 pm to Shankopotomus
quote:
If you are a mortgage originator, you are sort of proving his point
I'm not a mortgage originator.
To me, this is an example of fraud:
This will be a simplified version. Taxpayer has no income other than Schedule C business income. The mortgage company requires income of $100,000 to qualify for the loan.
Here is the taxpayer's actual Schedule C:
Gross Income = $500,000
Cost of Goods Sold = <$300,000>
Supplies = <$50,000>
Repairs = <$50,000>
Vehicle Expenses = <$15,000>
Office Supplies = <$10,000>
Net Income = $75,000
The taxpayer would not qualify for the loan.
But, wait, let's just not deduct the vehicle/office supplies. That will get us to $100,000!!!
To me, that is fraud. Taxpayer is artificially inflating their income.
Posted on 12/15/15 at 1:49 pm to krehn11
but that person would have to pay taxes on that income, which is exactly what the IRS wants
you are not required to take deductions, I think that is where we are not aligned here
you are not required to take deductions, I think that is where we are not aligned here
Posted on 12/15/15 at 1:54 pm to Shankopotomus
quote:
but that person would have to pay taxes on that income
I do not disagree with that at all.
I just believe it is fraudulent to report that information to the bank in order to qualify for a loan.
That being said, the loan officer needs to be smart enough to dig through the Schedule C to make sure everything makes sense. If it doesn't make sense, ask for more information.
ETA: I am NOT accusing the OP of doing this. The way I read his post, that's what I assumed he was trying to do. But we may not be on the same page.
This post was edited on 12/15/15 at 1:57 pm
Posted on 12/15/15 at 2:32 pm to Shankopotomus
quote:
amending returns isnt fraud
falsifying information or documents is fraud
DISTINCT difference
filing a return you know isn't correct and knowing you'll later amend is pretty much falsifying documents
The bank is trying to get a picture of the health of the business. If he uses his cell phone for the business but doesn't show the expense or drives his truck everyday for business purposes but doesn't show that expense either then they don't have all information necessary to get that picture.
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