SELF EMPLOYED BORROWER USING IRS FORM 1065

This document will review how to navigate the IncomeXpert tool including the following topics

Step by step instructions

A) Using the IRS Tax Form 1065 to determine your self-employed borrowers income

Your borrower should have 1065 self-employed income type for the calculator

On the income tab, choose the borrower the income is being evaluated for, in this case Borrower One.
Click the magnifying glass next to the1065 income calculator

Enter the most recent tax year being evaluated
The left column is always the most recent year and the right column is the previous year

Enter W-2 information if applicable.

Enter the remaining information into IncomeXpert just as you read it on the tax return.  No need to change sign (positive or negative) when entering data, just enter as you see it.

IncomeXpert contains “pop up” messages for income fields with additional requirements to ensure the most accurate income calculation is determined. For example if you enter a number into line 16D (mortgage notes bonds due in less than 1 year) IncomeXpert will remind you that this does not need to be deducted from the income if the business has enough cash or the CPA confirms the debt can “roll over”.

Click the Save/Calculate button on the left side of the screen to complete income analysis.

Use the income analysis section to choose the correct Qualified Income Determination (K-1 vs Distributed K-1) 

IncomeXpert will recommend using either the K-1 or Distributed K-1 income. 

Pay note of the trending arrows

• Green up arrow: the income is stable or increasing
• Red down arrow: the income has declined from the previous year
• The top number (63.5%) is the actual change of income from the previous tax year to the current tax year, the bottom number (10% threshold) is your company setting to "trigger" declining income

Use the income analysis section to choose the correct qualified income analysis

• YTD P/L 
• 1 Year Average
• 2 Year Average
• User override ignores all calculations and will report the income submitted as the qualified income
• Not Used 

Notes in regard to the borrowers income can be entered in for review by the underwriter, auditor, or investor