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Determining Cash Flow from Personal Tax Returns Part 1: Form 1040, Schedules B & C

Feb 17 2:00 PM - Feb 17, 2021 3:30 PM
Feb 17, 2021 2:00 PM - 3:30 PM
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Using personal tax returns to determine a borrower’s actual cash flow available to service debt is as challenging as ever. Join us to learn the latest techniques to help you sort out all that tax data and find exactly the information you need.

Learning Objectives

  • Understand the concept of recurring income
  • Find employee business expenses that might not count toward cash flow
  • Identify actual cash flows from Schedule B: Interest and Dividends
  • Correctly account for pass-through interest and dividend income earned from Partnerships and S Corporations contained on Schedule B
  • Identify hidden income and expense in a Sole Proprietorship

What does a lender need from a personal tax return? Simple. They need to determine if there is reliable, recurring cash flow available to make debt payments. Unfortunately, tax returns were never designed to show cash flow. They show taxable income.

With the information from this session, along with the free Lenders Tax Analyzer© software included with your registration, you will learn an easy, reliable method to convert a borrower’s personal tax return (Form 1040) to an accurate cash flow statement.

In Part 1 of this 2-part program, we will dissect the front page of Form 1040, Schedule B (interest and dividend incomes), and Schedule C (sole proprietorship incomes). When you finish this session, you will be able do a little ‘magic’ and convert taxable income into actual cash flow that you can plug into your credit scoring model, your debt-to-income ratio, or your disposable income calculation.

Note: This session is designed for consumer and commercial lenders. 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 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. 




Additional Info

Event Type

On-Demand Webinar

Topics Covered

  • On-Demand Webinars
  • Operations
  • Lending & Collections
  • Executive Management