I am looking at getting a mortgage loan however I've been a 1099 since 2009. The problem I am running into is my income in 2012 was low as I was part-time and in college and when averaged out for a mortgage brings my income down to below any level of possible loans. I am making more than enough money now, have great credit and low debt but none of this matters as a 1099.
What was suggested to me, because of the situation with the company I work for, is to have the accounting firm we work for start handling our payroll (we have 70 contractors) and put me on payroll and retroactively set up a W2/pay stub for me for 2014 so when applying for a mortgage my income in 2012/13 doesn't matter.
However I am not sure how this actually works with an accounting firm and I'm not authorized to really talk to them directly. Any thoughts?
Doesn't matter if it's on a 1099 or a W2, it's still income so I don't see how changing you to a W2 worker would change anything. You are getting a 1099 and reporting it as income on your taxes aren't you?? If not that's tax evasion and that's what they got Al Capone for
With all that being said, are you an independent contractor or is your employer just calling you that to avoid paying payroll taxes?? The IRS does have rules stating the difference between the two.
Doesn't matter if it's on a 1099 or a W2, it's still income so I don't see how changing you to a W2 worker would change anything. You are getting a 1099 and reporting it as income on your taxes aren't you?? If not that's tax evasion and that's what they got Al Capone for
With all that being said, are you an independent contractor or is your employer just calling you that to avoid paying payroll taxes?? The IRS does have rules stating the difference between the two.
Has nothing to do with the tax end of it. However, all the lending brokers I've spoke too basically have told me this: "If you are 1099, we average 2012/2013 taxes to find out your income to base a loan on. But if you are a W2 we need 2 months of W2s to get you financed."
Zero chance of me getting a loan via my tax returns, I was a student/internship basically with the company, 3 years later with them I'm making 5x as much now.
I guess I see where the bank is coming from. Getting paid with a 1099 means to the bank you're a contractor and pay can fluctuate year to year depending on work load and expenses. A W2 wage earner is a more steady form of pay.
With that being said, you really can't go jumping from 1099 pay to W2 pay just because it suits you one year and not the next (that came out kind of arsehole-ish and it was NOT supposed to). There would have to be a change in your work situation, and more importantly, the relationship between you and your employer for you to be able to switch. As I said in my previous post, the IRS has set up rules to determine weather you are a "contractor" or employee.
With all of THAT being said, I really don't know your entire situation either and could be missing something major. Just calling it as I see it.
[This message has been edited by fastblack (edited 05-12-2014).]
I would be considered a sole proprietor right now.
quote
Originally posted by fastblack:
I guess I see where the bank is coming from. Getting paid with a 1099 means to the bank you're a contractor and pay can fluctuate year to year depending on work load and expenses. A W2 wage earner is a more steady form of pay.
With that being said, you really can't go jumping from 1099 pay to W2 pay just because it suits you one year and not the next (that came out kind of arsehole-ish and it was NOT supposed to). There would have to be a change in your work situation, and more importantly, the relationship between you and your employer for you to be able to switch. As I said in my previous post, the IRS has set up rules to determine weather you are a "contractor" or employee.
With all of THAT being said, I really don't know your entire situation either and could be missing something major. Just calling it as I see it.
If the IRS audited us, I would most likely be reclassified as a W2, its not just to 'suit me' but this whole buying a house thing has kind of got the gears rolling.
Wouldnt your past years tax records satisfy them as to income ? Ive made a lot of big purchases and about all they cared about was last years taxes (sometimes) and my credit rating. None even ever called any other creditors or bank. Last big purchases was a class A motorhome and one of my airplanes ($100,0000). I bought the motorhome last year with no income on the application other than social security (whole ss check wouldnt pay for it)...they also didnt even contact my bank, and the only car loan ive had in decades was in 04 for the Magnum, and thats not even listed on my credit report from Chrysler financing. When I applied for it, i asked about only having SS as income and if it would affect getting the loan. They went thru a local bank for a loan and just told me I was approved for anything they had on the lot up to $200,000.
[This message has been edited by rogergarrison (edited 05-13-2014).]
Wouldnt your past years tax records satisfy them as to income ? Ive made a lot of big purchases and about all they cared about was last years taxes (sometimes) and my credit rating. None even ever called any other creditors or bank. Last big purchases was a class A motorhome and one of my airplanes ($100,0000). I bought the motorhome last year with no income on the application other than social security (whole ss check wouldnt pay for it)...they also didnt even contact my bank, and the only car loan ive had in decades was in 04 for the Magnum, and thats not even listed on my credit report from Chrysler financing. When I applied for it, i asked about only having SS as income and if it would affect getting the loan. They went thru a local bank for a loan and just told me I was approved for anything they had on the lot up to $200,000.
It does satisfy them but they take that and apply it to my current debt. In 2012 I was only working a handful of hours while in college and 2013 I didn't go 'full-time' until late in the year. Plus all those deductions I took to lower my taxable income pretty much put the stake through the heart of getting a home loan being a 1099.
Being a W2, they only look at credit score and 1-3 months of W2 statements, which represents my real income.
