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Qualifying Borrowers Using Personal Tax Returns Part 1: Form 1040 & Schedules B & C

Feb 19 2:00 PM - Feb 19, 2020 3:30 PM
Feb 19, 2020 2:00 PM - 3:30 PM

Borrowers don’t repay debt with taxable income; they use cash flow. Can you accurately interpret personal tax returns and identify reliable, recurring income?

Learning Objectives

  • Identify recurring income and learn what to ignore
  • Determine cash flows from interest earning and dividend producing investments(Schedule B)
  • Correct unreliable “pass-through” interest and dividend incomes earned from Partnerships and S Corporations (Schedule B)
  • Identify hidden incomes and a hidden expense in sole proprietor ships (Schedule C)

What’s your decision-making process for qualifying a borrower for a loan? Do you understand how to convert taxable income (which is practically useless) into cash flow?The key is learning how to obtain a reliable monthly or annual cash flow from a personal tax return. Incorrectly estimating cash flow from a tax return can result in bad loan decisions – or missed opportunities. Once you’ve properly converted taxable income into cash flow, that information can be used in your credit scoring model, debt-to-income ratio,or disposable income calculation. Designed for consumer and commercial lenders, this two-part series will teach you an easy, reliable method to convert a borrower’s personal tax return (Form 1040) into annual and monthly cash flow statements using the free software included with this course. Part 1 will cover Form 1040, Schedule B (Interest and Dividend Incomes) and Schedule C (Sole Proprietorship Incomes).

(Note: This method does not follow Fannie, Freddie, or QM rules used in mortgage lending.)



Tim Harrington, CPA, TEAM Resources

Tim Harrington is President of TEAM Resources and has been a financial institution consultant for over 27 years. Tim has advised lenders on verifying income from tax returns since 1992, and consults with financial institutions nationwide on issues of strategy, profitability, and board governance. He speaks at nationwide conferences and has presented in Canada, Mexico, Puerto Rico, Jamaica, and the Virgin Islands. Tim is the author of the popular software, Lenders Tax Analyzer. In addition, his book “Eisenhower on Enlightened Leadership” has been used by management teams nationwide to improve leadership skills. He did his undergraduate studies at Gonzaga University and graduate studies at the University of Washington.




Additional Info

Event Type

On-Demand Webinar

Topics Covered

  • On-Demand Webinars
  • Lending & Collections