Tax Returns for Mortgage Broker

[Judy rocks]

A new client is trying to get prequalification for a loan to buy a house.
He is an independent filmmaker who in 2014 had an NOL Carryforward of 110,000 and a loss of 80,000 on the sale of a house.
He is asking if there is anyway I can take the losses off the 2014 tax return copy that he needs to submit to the Mortgage Broker.
He wants me to submit the copy to the Mortgage Broker that only shows what he earned in 2014.
Can I do this?

[JohnH]

A new client is trying to get prequalification for a loan to buy a house.
He is an independent filmmaker who in 2014 had an NOL Carryforward of 110,000 and a loss of 80,000 on the sale of a house.
He is asking if there is anyway I can take the losses off the 2014 tax return copy that he needs to submit to the Mortgage Broker.
He wants me to submit the copy to the Mortgage Broker that only shows what he earned in 2014.
Can I do this?

Not unless you relish being a party to mortgage fraud.

Don't submit anything to the mortgage broker.
This is why clients have fax machines, scanners, and postage stamps.

There's no valid reason for you to be in the middle of this transaction, and plenty to stay away.
Your client has given you another huge reason to keep your distance.

[ATSMAN]

JohnH is correct. You will set yourself for a lawsuit!

Do NOT change anything on a return that you already filed just to make your client get a loan. My policy is that I will give them a copy of the return as filed and that is all I can do. I do NOT provide any verification or audit of their income or expenses for this purpose.

[TAXNJ]

230

A new client is trying to get prequalification for a loan to buy a house.
He is an independent filmmaker who in 2014 had an NOL Carryforward of 110,000 and a loss of 80,000 on the sale of a house.
He is asking if there is anyway I can take the losses off the 2014 tax return copy that he needs to submit to the Mortgage Broker.
He wants me to submit the copy to the Mortgage Broker that only shows what he earned in 2014.
Can I do this?

Recommend you read and become familiar with circular 230 if you prepare tax returns and maybe consider malpractice insurance

[taxea]

Additionally my client copy of the return has a watermark in the signature section that says "client copy, do not file, do not sign".
This is the copy they are instructed to provide to the mortgage company with the explanation that the original return filed with the IRS is the only return that should be signed by the client and myself. I will not sign a copy that is being submitted to a third-party and neither should the TP.
Doesn't your client realize that the mortgage companies obtained a signed copy of the request for return transcript from him so that they can verify that both the IRS filing and the copy submitted by the client are the same?????

[Burke]

taxea is correct. The paper copy is just for preliminary review. They will not do anything until they get an official IRS transcript. THEN, what's gonna happen? He can forget the loan.

[JohnH]

The client signaled that he plays fast and loose with the facts in order to get what he wants. He obviously has no qualms asking his tax preparer to commit a crime if it serves his purposes. There's absolutely no question that Judy should keep lots of distance from this loan application (or any loan application for that matter).

But the bigger issue is the veracity of the info he provided for the return itself. Her name is already on that document. And I'm betting that anyone who would ask their tax preparer to take this type of risk on a loan application will throw the preparer under the bus in a split second if they are audited. Hope the original return is well documented.

[ATSMAN]

The client signaled that he plays fast and loose with the facts in order to get what he wants. He obviously has no qualms asking his tax preparer to commit a crime if it serves his purposes. There's absolutely no question that Judy should keep lots of distance from this loan application (or any loan application for that matter).

But the bigger issue is the veracity of the info he provided for the return itself. Her name is already on that document. And I'm betting that anyone who would ask their tax preparer to take this type of risk on a loan application will throw the preparer under the bus in a split second if they are audited. Hope the original return is well documented.

Excellent observation. These types of people will point the finger to the preparer the moment they are challenged! It is like playing with fire if you go along with these schemes.

[TAXNJ]

Bottom

Excellent observation. These types of people will point the finger to the preparer the moment they are challenged! It is like playing with fire if you go along with these schemes.

Bottom line, a preparer should know better or should not be in the business.

[JohnH]

Bottom line, a preparer should know better or should not be in the business.

I think any of us can have blind spots.
It's easy to run into an unfamiliar situation, and tax preparation doesn't always follow common sense rules.

Personally, I've come to this forum (or others) before with a question & my possible solution, only to find that my take on the subject was totally off base. Thankfully someone straightened me out and saved me some embarrassment, or maybe even a situation in which I might have needed to reimburse a penalty. I think we should strive for this to be a safe place to pose scenarios, ask questions, and get constructive feedback.

[AZ-Tax]

I had a somewhat similar request except direct form Mortgage broker

I had a somewhat similar request except direct form Mortgage broker. After the Mortgage broker reviewed my clients tax return and the transcript, the mortgage broker wants to meet with me privately regarding what net profit is required from my clients SE business for TY 2015 in order for my client to qualify for a mortgage.

[TAXNJ]

Wow

I had a somewhat similar request except direct form Mortgage broker. After the Mortgage broker reviewed my clients tax return and the transcript, the mortgage broker wants to meet with me privately regarding what net profit is required from my clients SE business for TY 2015 in order for my client to qualify for a mortgage.

What was the result?

Hopefully you client changed brokers. Wonder what broker said verbally what mortgage terms are vs written terms!

Quite a few different posts on this topic

[JohnH]

I'd tell the broker this type of meeting would be worse than useless, because after the meeting I'd probably tell the client the broker is trying to counsel us all on how to break the law. But if the broker wants to take his chances, my rate is $120/hr, payable in advance. His decision.

[TAXNJ]

Low

I'd tell the broker this type of meeting would be worse than useless, because after the meeting I'd probably tell the client the broker is trying to counsel us all on how to break the law. But if the broker wants to take his chances, my rate is $120/hr, payable in advance. His decision.

Your fee is low to meet with a broker to tell them what was filed is what client provided and No change.

You fee is probably 5+ times lower than broker's commission

[JohnH]

True, but my fee is an honest fee based on actual services rendered.
I would provide something tangible for the broker - a copy of the 4506 and instructions.

Maybe I'd give him some printed info on mortgage fraud as well.
Better yet, I'd give him a printout of this Wikipedia article and tell him I'd already provided a copy to the client with the relevant parts highlighted.

https://en.wikipedia.org/wiki/Mortgage_fraud