CTC - 1040 needed as proof of "income"

[iplawyer]

For all of you who have had returns accepted, has anyone been confronted with the situation where a tax return has been required for proof of income?

I was attempting to co-sign a student loan for my son and they required my last two year's tax returns, they would not accept my 1099-MISC as proof of income. They would not issue the loan based upon my valid tax returns.

Has anyone been confronted with this situation? I have a client who is going to file bankruptcy and I was reading through the filing documents, they require 4 years of tax returns and it struck me that my tax returns would qualify me as receiving no income for 4 years! How would the trustee handle this situation? It is a situation just the opposite of getting a loan.

If, they will not accept the returns for receiving a loan, would they not have to treat them the same for bankruptcy? I would think the trustee would have to accept the 1099's instead.

This blows loan officer's minds! They are dumb struck by this.

Any comments?

How stupid can you get. You want to rebut the 1099 as income for tax purposes, but use it as proof of income to get a loan.

[The Observer]

How stupid can you get. You want to rebut the 1099 as income for tax purposes, but use it as proof of income to get a loan.

Not to mention whether a CTCer will be tempted to provide some tax returns that show his or her income in order to get the loan. But even more dangerous is filing a bankruptcy and submitting the non-income returns - they are leaving themselves open to a potential bankruptcy fraud charge.

Sir Walter Scott had a pithy comment on this situation:

Oh what a tangled web we weave,
When first we practice to decieve!

[LPC]

Not to mention whether a CTCer will be tempted to provide some tax returns that show his or her income in order to get the loan. But even more dangerous is filing a bankruptcy and submitting the non-income returns - they are leaving themselves open to a potential bankruptcy fraud charge.

Karl Kleinpaste did something similar. He stopped filing income tax returns, but then provided copies of his "returns" in order to get a mortgage. He ended up being convicted of both failure-to-file and making false statements on a credit application.

[Doktor Avalanche]

Just when you think you've seen it all.

[Quixote]

They would not issue the loan based upon my valid tax returns.

If, they will not accept the returns for receiving a loan, ...

Why does he assume the loan officer didn't accept his returns as accurate? It's more likely the loan officer just refused to accept someone with no income or other way of paying off the loan as a co-signer.

If, they will not accept the returns for receiving a loan, would they not have to treat them the same for bankruptcy?

They? Loan officers set the rules of evidence for bankruptcy? Who knew.

[The Observer]

If, they will not accept the returns for receiving a loan, would they not have to treat them the same for bankruptcy?

They? Loan officers set the rules of evidence for bankruptcy? Who knew.

I was thinking that he was under the distinct impression that loan officers moonlight as bankruptcy judges...

[Disilloosianed]

Oh my god....if you tell Party A that you have no income, Party B may just believe you.

Now the poor fool is stuck trying to prove that he really does have income...well, no, wait....not really income.....If it were income, it would be taxable.....I mean.....

You know, though, another explanation could be that the bank isn't interested in loaning money to wingnuts. I try to avoid that myself.

[Quixote]

Oh my god....if you tell Party A that you have no income, Party B may just believe you.

Now the poor fool is stuck trying to prove that he really does have income...well, no, wait....not really income.....If it were income, it would be taxable.....I mean.....

You know, though, another explanation could be that the bank isn't interested in loaning money to wingnuts. I try to avoid that myself.

It's just a few short steps from CTC to redemption theory. When the payment deferral ends after junior graduates, still dumb as a post, like his old man, he's likely to argue that he got nothing for the vapor money he borrowed. And he'd be right, but for the wrong reasons.

[Evil Squirrel Overlord]

One of the four tax evaders (defacto protestors) I have know in my life was up in arms about how no bank would give him a loan because he no income paperwork (self-employed all his life) he couldn't see that having never paid income tax for his entire life made him a gross liability for any loan. I wonder how the 1990's treated him...

Just checked...
His restaurant is long gone.

[grixit]

A few years back the then governor of Arizona managed to achieve the elected official's triple crown: impeachment, indictment, and recall at the same time. Apparently at one point he filed a financial statement with the IRS showing that he was broke while at the same time he wasapplying for a business loan and declared a lot of income and assets. An associate of his said that well financial statements are tricky, so you should always cross out "true and correct" and write in "best estimate".

[Quixote]

My office is occasionally contacted by people who say that the only thing standing between them and a new house is a federal tax lien, that if the IRS would just withdraw that notice of lien, their loan would go through. I have tried tactfully suggesting that the bank may be using the tax lien as an excuse to avoid having to tell them their credit sucks. It never works, so I tell them to get a letter from the bank guaranteeing them a loan just as soon as the NFTL is withdrawn. I promise them if they'll get that letter, I'll do my best to get the NFTL withdrawn. I never see them again.

BTW, at least two of them have told me that as soon as they buy the house in question, they plan on getting a home equity loan to pay off their taxes. Neither one was fazed when I explained the concept of "equity" to them and explained why they would have none immediately after their no down payment purchase.

[LPC]

I finally corrected the typo in the title to the thread. (I.e., "prrof.") It was getting to me.

[Investor]

BTW, at least two of them have told me that as soon as they buy the house in question, they plan on getting a home equity loan to pay off their taxes. Neither one was fazed when I explained the concept of "equity" to them and explained why they would have none immediately after their no down payment purchase.

Equity in a home? How 20th Century of you .

Next you'll be warning me about having a margin account, leveraged to the hilt, in order to own my purely speculative, never had any income, start-up stock in a company whose product or service I don't even understand.

[Evil Squirrel Overlord]

What scares me is that 3 doors down an old crack house was bought for $300,000 over the market value (when you speculate, think big) and having figured out that the rent is too high for the college students across the street they are trying to sell it for $200,000 over market value. (I think they are hoping the college will expand.) What makes it doubly scary is that the house next to it is being sold on orders form God. (I'm not kidding.) And in my humble opionion, whenever God commands somebody to sell property by a certain date and move down to Mississippi, he should provide a buyer. In otherwords, I may be dealing with two abandoned houses on my block.

Thanks alot God!

[Randall]

Equity in a home? How 20th Century of you .

I have a home that has lost about 40% of its equity and is about 20% less than I paid for it 6 years ago. Divorce forces sale, I hope someone brings the KY to the closing - if I should be lucky enough to find a buyer. A few realtors have advised foreclosure which is tempting as I have another home.

[Prof]

Equity in a home? How 20th Century of you .

I have a home that has lost about 40% of its equity and is about 20% less than I paid for it 6 years ago. Divorce forces sale, I hope someone brings the KY to the closing - if I should be lucky enough to find a buyer. A few realtors have advised foreclosure which is tempting as I have another home.

Having taken cash to a closing -- as the seller --, I can safely say that the KY does not help. However, check with your own tax advisor, but if you can work an arrangement with your Ex and convert the property to rental property, when you do sell you might be able to take a captial gains deduction. Like I said -- consult with an expert. My specialty is not income taxation.

I would not recommend a friendly foreclosure except in extreme circumstances (one of my specialties is bankruptcy and related areas); even in a state like Texas that has a strong bias against lenders who wish to prove up a deficiency after a non-judicial foreclosure, the foreclosure will still taint your credit report pretty much forever.

Interestingly, if I had stayed in DC, the house I sold at a loss would now be worth a lot of money. Timing is everything.

[Imalawman]

Equity in a home? How 20th Century of you .

I have a home that has lost about 40% of its equity and is about 20% less than I paid for it 6 years ago. Divorce forces sale, I hope someone brings the KY to the closing - if I should be lucky enough to find a buyer. A few realtors have advised foreclosure which is tempting as I have another home.

Having taken cash to a closing -- as the seller --, I can safely say that the KY does not help. However, check with your own tax advisor, but if you can work an arrangement with your Ex and convert the property to rental property, when you do sell you might be able to take a captial gains deduction. Like I said -- consult with an expert. My specialty is not income taxation.

I bought a house 4 months ago and got a couple thousand dollars back from the closing. I think I did well buying when I did, now I just need to stay put for a few years or I'll end up in the same place.