Introduction & Overview of Personal Tax Returns for Self-Employed Borrowers

Tax returns are the primary source of financial information for many consumer and commercial lending decisions. In assessing a personal borrower that is self-employed or a business owner, the personal tax return (PTR) moves the lender beyond the balance sheet and limited income/expense data of a personal financial statement (PFS) and into a better understanding of actual cash flow. Because this borrower's cash flow is dependent on a business, the business tax return (BTR) often is needed to verify key sources of personal income and cash flow. This webinar will focus on the format and content of a typical PTR and BTR, and demonstrate how to utilize key data within the underwriting model your organization uses.

Covered Topics:

  • PTR overview and eight items bankers should look for
  • The spectrum of situations, and differentiating between income/expense and actual cash flow items in a PTR
  • Key components and schedules within a personal Form 1040, with a case example
  • BTR overview and determining the basis of accounting used (the tax return format is considered an other comprehensive basis of accounting as an alternative to generally accepted accounting principles or GAAP)
  • Key BTR forms for corporations, S corporations and partnerships and LLCs, including Schedule M-1 and Schedule M-2
  • A short list of formatting differences between business financial statements and BTRs, with a case example

Who Should Attend?

Branch managers, consumer lenders, mortgage bankers, private bankers, small business lenders, commercial lenders, credit analysts, loan review specialists, special assets officers, lending managers and credit officers.