SELF EMPLOYED BORROWER USING IRS FORM 1120S
This document will review how to navigate the IncomeXpert tool including the following topics
Step by step instructions
A) Using the IRS Tax Form 1120S to determine your self-employed borrowers income
Your borrower should have 1120S self-employed income type for the calculator
On the income tab choose the borrower the income is being evaluated for
Click the magnifying glass next to the 1120S 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 income to the calculator just as you see it on the tax form, no need to change sign (positive or negative).
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 17D (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