Does it ever seem you need a secret decoder ring to convert business tax returns to cash flow? This session will help take the mystery out of Partnership and S-Corp tax returns so you can identify real cash flow quickly and accurately.
- Find the real cash flow from a Form 1065 (Partnership) and a Form 1120-S (SCorporation) tax return
- Understand what a ‘pass through’ entity is and how it affects tax reporting and cashflow
- Identify how much the owners are taking out of the business in salaries, dividends/distributions, and loans
- Convert an accrual basis tax return to cash basis
- Learn how to read the Schedule K-1 to identify cash flow
- Distinguish between phantom income and real cash flow
To qualify a business borrower for a loan, you need to be able to determine the cash flow of the business entity (or entities) involved. Tax returns were designed to report taxable income, not cash flow. Partnerships and S-Corps are pass-through entities, meaning that they do not pay taxes directly. Instead, they pass the taxable income through to the owners’ individual tax returns. Your job is to disentangle all the passed-through incomes, reassemble them for the business, then determine what cash flow will be used as qualifying income.
Overestimating income from a tax return may lead to the approval of a weak loan that could cost your institution hundreds of thousands of dollars in losses. Under estimating income can lead you to deny loans that should be approved, resulting in missed opportunities to grow your loan base. This session will help take the mystery out of Partnership and S-Corp tax returns so you can identify real cash flow quickly and accurately.
Tim Harrington, TEAM Resources
Tim Harrington is President of TEAM Resources and has been a financial institution consultant for over 28 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.