Tax Return Red Flags

 

Form 1040

 

> Personal information does not agree with the information in the loan file.

 

> High-income borrower with few or no deductions.

 

> Even dollar amounts for income or deductions.

 

> Tax returns are not signed / dated by borrower.

 

> Self-employed borrower that dies bit reflect estimated tax payment (Schedule SE)

 

> W-2 information does not match the figures reported on the 1040s.

 

> Evidence of whiteout or strikeovers, alterations or varied handwriting within return.

 

> Paid tax preparer does not disclose tax ID.

 

> Paid tax preparer signs taxpayer's copy.

 

> Handwritten tax returns prepared by a professional tax preparer.

 

Schedule A

 

> Real estate taxes or mortgage interest reported, but no real estate owned.

 

> Real estate owned, but no deductions taken for real estate texas or mortgage interest paid.

 

Schedule B

 

> Stock owned, but no dividend income reported.

 

> Interest income reported is not consistent with cash assets in bank.

 

> Source and/or amount of income are not consistant with loan application.

 

Schedule C

 

> Gross income does not agree with total income on form 1099.

 

> Interest expense, but borrower does not disclose a related loan.

 

> Depreciation deduction for real estate, but ownership is not disclosed (vice versa).

 

> No IRA or Keogh deduction.

 

> No salary expense to ooperate business.

 

> No deduction for depreciation (usually some type of equipment qualifies).

 

> No "cost of goods sold" on retail type of business.

 

Schedule E

 

> Properties listed not disclosed on the loan application.

 

> Borrower income/loss not disclosed on loan application.

 

> Mortgage interest deduction taken, but debt is not disclosed on the loan application.

 

> Net income in not consistent with amount disclosed on loan application.