Saturday, January 10, 2009

I Get Paid a Salary From My Family's Business. Why Does a Lender Need to See My Taxes?

We've had a few borrowers ask this question recently: If I get paid a salary from my family's business and get a W-2, why does the lender need to see my tax returns?

The reason the underwriter needs to see tax returns for a salaried employee of a family business is because they are looking to see if the borrower owns any part of the business. It's possible to receive a salary and be treated as an employee of a business and still have an ownership interest in that business. If that's the case, then the borrower is considered to be self-employed in some cases. Also, any losses from the business that are passed on to the borrower need to be deducted from their income.

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