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My husband and I are trying to refinance our residence. The…

My husband and I...

My husband and I are trying to refinance our residence. The underwriter is asking as a condition of approval to provide proof that a small business of which I am a partner that the IRS has received the business's 2017 tax returns. They say they need proof that I receive income from the profits of that business which is a pass through entity and neither pays additional taxes nor receives refunds.

Lawyer's Assistant: You can email***@******.***. JustAnswer is backed by a 100% satisfaction guarantee. So if our Customer Care team can't address your issue, and it's been 30 days or less since you paid to ask your question, they will refund your money.

I am very upset that they are trying to use the tax return issue as a condition of approval, especially since the tax returns have nothing to do with the annual profit distribution. Thank you. *****: Because real estate law varies from place to place, can you tell me what state this is in?

Yes, sorry....California

Lawyer's Assistant: Has any paperwork been filed?

In terms of the re-fi, yes. All the documents they have requested. But I have not discussed anything with a lawyer.

Lawyer's Assistant: Anything else you want the lawyer to know before I connect you?

I don't think so.

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Answered in 34 minutes by:
3/14/2018
Attorney Wendy
Category: Legal
Satisfied Customers: 491
Experience: Member at Keefer & Keefer LLC
Verified

Hello. My name is ***** ***** I am an attorney. Is the small business your only source of income?

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It is quite common during the refinance process for lenders to request tax returns on any businesses from which the applicants receive income. This is particularly true in cases where the applicants are self-employed. As you know, tax returns do not necessarily reflect the full financial picture of a business, but they are the only means of a lender's gauging the viability and likely income provided from a business where the loan applicant does not receive a salary and W-2. If your husband is a W-2 employee and not self-employed one option is to refinance the home in his name with both of you as titled owners. This is often an option where one loan applicant is self-employed and simply doesn't want to go through the hassle of providing the documentation required to qualify for the loan. The newer the business of a self-employed applicant, the more documents are likely required by the lender.

I am so sorry you are going through this; I have been there and it is incredibly frustrating. If you need further help, please reply to this email. If I answered your question, I would greatly appreciate your 5 star rating at this time.

Please note: This information is for educational purposes only and is not legal advice. No course of action is being proposed and no attorney-client relationship or privilege has been formed as a result of this conversation.

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Customer reply replied 1 month ago
Hi Wendy,
Thank you. The loan is being processed in both of our names. My husband is fully employed and I am retired. My income is social security, savings, rental from a fully owned rental property and the business income which is a small farm with my brother and sister as additional partners. I have already sent the underwriter all tax returns (both individual - married filing jointly - and the business for 2015, and 2016 and 2017. They have seen the documentation......the issue is that they want to see PROOF that the IRS has received the farm tax returns. As you know transcripts from IRS lag way behind the receipt date and as the IRS explained even though the April 15 date has passed, it still may take weeks or months for them to be posted. I have already recieved a check fro the profits which I have provided to them as well as the bank statement in which the check was deposited. Do you understand now? I have also sent the underwriter a spread sheet of the farm profits for the last 4 or 5 years.

That clarifies it a lot. Thank you for that additional information. Was the farm's tax return transmitted via mail or electronically? Did you or one of your siblings prepare it or was it prepared by an accountant? I am just trying to consider other means of proving receipt (e.g., a statement from the accountant who submitted it, or an electronic receipt that the return has been accepted - which you receive when you submit using a variety of online services)? Unfortunately, the bank can require whatever it wants, no matter how unnecessary and tedious it may seem. But I am trying to be creative about things you may be able to offer to get the bank to move ahead with the loan without having to wait on the IRS.

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Customer reply replied 1 month ago
My brother who is not an accountant prepared the return and mailed it on Jan. 26 without requesting a return receipt to the IRS offices in Cincinatti.(Did I say the farm is in Ohio?). He has called that office and was told that they. Don’t know if the return was there.
Customer reply replied 1 month ago
Good to know that the bank can ask for anything they want. However since this seems to be impossible it goes to the heart of the issue. At braid time it is impossible request. But can we be turned down for being unable to provide the docs? We have fulfilled everything else they requested. Thanks.

This probably isn't going to make you feel better, but provide whatever you can (which is sounds like you have), and hopefully when the loan goes to the appropriate office for approval they will be satisfied. Having gone through this same process just a couple years ago and facing similar frustrations, I certainly empathize. Unfortunately, the IRS is not only very slow to respond to requests of this nature, with the filing deadlines looming this month and next for various entities and individuals, I wouldn't expect a prompt response. I am perplexed that the bank is requiring the 2017 taxes with that business' not being the primary income upon which the refinance is based and since partnership returns are not even due for filing until tomorrow. I am here if you have any other questions and wish I could provide more solutions in this instance.

Attorney Wendy
Category: Legal
Satisfied Customers: 491
Experience: Member at Keefer & Keefer LLC
Verified
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Customer reply replied 1 month ago
Thank you, Wendy. I appreciate your sympathy!! Very frustrating and seems to be a sign that they don't want to write the loan. However, to emphasize your point, they have not asked for the signed lease for our rental property which generates 1250/mo. Something is fishy, I'd say. Thanks again. *****

You are very welcome; I will hope for and wish you the best. Sometimes the person or people handling these matters just don't understand what they should really be focusing on. Best of luck! And, let me know if any other questions come up with the refinance.

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