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Tulsa Mortgage : Podcast 21 – Part 2

Tulsa Mortgage Steve: No. It just means maybe the IRS takes $100 of my income, and they move it over to this side, and they say, “Well that was a business expense, so you’re taxed less on it.”
Tyler: Right.
Steve: That’s what cranks me up about, “You need to write it off.” What? Damned, I want to do this in their ear [background noise]. “Just get out of here.” So yes, the number that they gave us Tyler is a lot different, and–
Tyler: Every time-
Steve: – of what they make. What we say they make, what the guidelines say the way, what the income calculation that we have to do for a self-employed person is different.
Tyler: Exactly.
Tulsa Mortgage Steve: So Eric Bum says he’s got to go sell something, “Have a huge day, qualified big truck, Sherman for sheriff, pizza can’t say, bam Charleston’s.” I don’t know; he must have heard Charleston’s so —
Tyler: [laughs] It’s where I went to dinner last night.
Steve: Is it?
Tyler: It is.
Steve: Nice. You got a history there.
Tyler: Yes, I do?
Tulsa Mortgage Steve: Yes, I thought then you’re like.
Tyler: No.
Steve: You didn’t work at Charleston’s?
Tyler: No. Never.
Tulsa Mortgage Steve: You know what I’m thinking of is — hold on it will come to me. Rick Gister. Ricky Gee out there. Ricky worked at Charleston’s. That’s what I was thinking you are going to tell me about the other day. All right, so the self-employed person tells me, their lender that they make a hundred grand a year, and we just cringe and say, “bring me here your tax returns.” And here’s the other thing that happens, don’t give me one page of your tax returns. Oh my gosh, you’re wasting us– you’re wasting the time of your lender. Don’t just give me one page of your tax returns.
Tyler: How many people discuss what they think we need?
Steve: Oh my God. Look, I’m not complaining, okay? People give what they think they should. I’m just saying if I ask you for all the pages of your tax return, don’t exclude something because you didn’t think I needed it. To be honest with you, we don’t need state tax returns ever, but we don’t even tell people don’t include the state returns because we just want everything because we’re afraid they’re going to leave a page out that they think is part of the state return but its rally part of the federal return, and we need it.
Tyler: Do you remember when a certain person gave us her tax returns, and it was literally a novel?
Steve: Yes-yes. We did that re-file after you —
Tyler: I can’t — I don’t know how to be descriptive for people that are listening on how big it was but —
Steve: It was the size of five or six encyclopedias stacked on top of each other.
Tulsa Mortgage Tyler: Yes and that was for one year.
Steve: Yes.
Tyler: One.
Steve: Yes. We’re talking about my real estate friend, right?
Tyler: Yes. Just a federal.
Tulsa Mortgage Steve: Yes, pretty crazy. There’s a lot there, and it took us a long time to do this loan. We did it though because we’re awesome, and when I say we’re awesome I mean me. I mean stevecarrington.com is awesome. So just look, here’s the lesson, how is self-employment income documented? Lots of different ways. So just get with your lender and make sure that before you try to get into contract on a house that you check with your lender — and make sure what income they can use so that you know what you qualify for. So here’s our statistic. Where’s our mystic statistic button, I don’t remember Tyler.
Tyler: I don’t know.
Steve: [background noise] I love doing that on Facebook because people can’t hear it and I’m sitting over here dancing, and they don’t know that Hallelujah is playing in the background. So most self-employed people have a lot of tax write offs which reduces their income and then reduces what they qualify for in a loan. So let’s take an example of a schedule C. So you’re a hairdresser and you have booth rent, and you report all the income, everybody pays via credit card and so you’ve got your gross receipts for the year of – ‘Hello Lauren Edmund,’ we’ve got all the mortgage people tuning in for pizza time.
Tyler: Hallo.
Steve: Hallo Lauren from Edmund. You’ve got gross receipts of $75,000, and then you have some equipment expense that you claim, right? Because you got to have equipment if you’re doing hair. You’ve got maybe some means of entertainment because you’re taking some clients out.
Tyler: Advertising expense.
Tulsa Mortgage Steve: Advertising, you got to buy signage, you got licensing, you’ve got to get your cosmetology license.
Tyler: Maybe a rental.
Steve: You got rent on your booth, yes. And so all of that is going to reduce your income. There’s two extra special; I’ll say three special little things that I can add back, and that is depreciation, depletion, and if you report mileage on page two of your Schedule C for business-related mileage, then I can add those back to your income. That’s it.
Tulsa Mortgage So if you took a automobile expense of $40,000 — we’re getting a phone call as we’re sitting here. If you get a auto expense of $40,000 and 20,000, that’s mileage I’m still reducing your income by 20,000 bucks, and I get 55. By the time you take all the licensing, and you do all those expenses, maybe you’re at 40, right? And then let’s pray that you have $20,000 in depreciation if you have other expenses because I can add that back to the bottom line. But that’s where you can real quickly go from 75,000 — Hi Brintmix from Ohio state, how are you, sir? On Facebook.
You can quickly go from $75,000 to $35,000 a month — a year in income and then I have to take it to your average. That’s where it can get nasty, and I told a story, but I totally skipped to my pilot story because I had a pilot story. It’s the same story. But a pilot makes 200 grand a year, but he’s a contract pilot, you know he flies somebody’s private jet, and he makes 200 grand a year but by the time I take out all his expenses, he makes about 50. And he wants a 4400,000 house. Hey, Jayson Hardrover., we have every — well Jayson’s no longer in mortgage. So he claims. So he claims. Tight and tidal in the house.
Tyler: Once you’re in, you’re always in?
Steve: What? You can’t – you can’t get out of this. You can only be set free maybe. So, your income is going to change typically dramatically once we get your tax returns when you’re self-employed. So just make sure that when dot com asks for your tax returns that you give me your tax returns and then I can actually calculate what you qualify for. So get with your lender. So recap my main point for me Tyler, what are we talking about?
Tyler: Self employed documentation.
Steve: Self employed documentation.

Tulsa Mortgage Tyler: Tax returns. Every single page of the tax returns. All the tax returns. All the schedules.

Tulsa Mortgage Steve: What’s so funny is that if you give me your first page of your tax returns, I can tell what’s missing, and so can an underwriter. So you can’t just give me page one and be like, “Oh no that’s all. That’s all I have.” I can see that you have a Schedule E. I can see that you have a schedule C. I can see all these things. So make sure that you’re giving — getting with your lender and getting all of those things together ahead of time so that you don’t get all surprised when it’s time to qualify for a loan. So that’s it. I think that’s it for the How Self-employment Income is Documented. I’m Steve Carrington, and I’m here with-
Tyler: Tyler Wagner
Steve: -and it’s the Steve ‘N Tyler show. See you.
[00:17:58] [END OF AUDIO]