UrbanTurf Reader Asks: A Tax Barrier for Self-Employed Home Buyers?

by UrbanTurf Staff

In this installment of UrbanTurf Reader Asks, a self-employed home buyer asks UrbanTurf readers for their advice on a tax issue that is preventing her from buying a house. I have been self employed for three years, and it's taken awhile to get to a place where I could qualify for a home loan. Earlier this year, I got pre-approved, found a home I wanted to buy and went under contract five weeks ago. I also filed my taxes as quickly as I could (i.e. the first week of February), as I recently found out that underwriters are now requiring transcripts showing that returns have been processed, which means that my stamped tax return is not good enough. It took a dozen calls (with 12 different answers), but finally yesterday (five days before I'm supposed to close) I learn that balance-due returns are shelved until May or June and it could be even longer than that before they're processed and transcripts are made available. The lender won't budge on the requirement, despite the fact I have plenty of money in the bank and I have the account transcripts showing what I paid and that it matches the return I filed. I wonder if the IRS knows or if lenders realize what the IRS procedures are and how this is affecting self-employed home buyers. I found out recently that the previous contract on this same house fell through for the exact same reason. I'd be very interested to hear if any UrbanTurf readers have run into this problem and how they were able to resolve it. Post your thoughts in the comments section. If you would like to submit a question for UrbanTurf Reader Asks, send an email to .(JavaScript must be enabled to view this email address).

See other articles related to: urbanturf reader asks, taxes, irs

This article originally published at https://dc.urbanturf.com/articles/blog/urbanturf_reader_asks_the_self-employment_tax_barrier_for_home_buyers/3276


  1. SimonF said at 10:20 am on Wednesday April 6, 2011:

    That is very frustrating. I know time might not allow for it, but have you explored using a different lender?

  1. Rob said at 11:11 am on Wednesday April 6, 2011:

    This is a strong argument for e-filing: if you e-file, your returns get processed far more quickly than if you mail in a paper return. 

    Of course, this won’t help you at all now.  But it’s something to think about for other self-employed folks out there who might be in this situation in the future.

  1. OP said at 2:26 pm on Wednesday April 6, 2011:

    It’s important to note that e-filing is NOT really a factor in this case.  This return was e-filed.  It has everything to do with the fact it was a return that was not due a refund and they are put into a different cue.  Because it has been paid, I am being told that it is a POSSIBILITY it will still post before June, but it depends on who you talk to and what day.  Today they’re telling me it COULD even show up on Monday.  Or June.  Makes it really hard to ask the sellers for an extension when I have no idea what the real time frame is.

    I’ve been forwarded onto a tax advocate and a 911 form has been filed.  One advocate told me there is nothing that can be done to speed it up, another advocate told me they MIGHT be able to.  Again, more mixed answers.

    I have calls out to other lenders to see if someone can do a conventional loan without the transcripts, but two different sources have now told me that mortgages not packaged with transcripts cannot be sold to secondary markets anymore, so no one is making them.

    I think the bottom line is to make sure when you file, know you need this transcript (if you need your previous year’s income to qualify) and in order to get it your return should have a refund coming in order to get priority.  Otherwise be prepared to wait and don’t get too comfey if your lenders, bank and anyone else involved is telling you that you’re pre-approved, because apparently they are not all on the same page with this yet.

  1. Susan Isaacs said at 9:36 pm on Wednesday April 6, 2011:

    Wow, that just sucks! A couple of questions for clarification:
    1. Do you file quarterly?
    2. Is your lender one that doesn’t sell their loans after settlement?
    3. Can you get an extension from the seller?
    Hope this works out for you! Things are tough enough for self-employed borrowers.

  1. OP said at 10:52 pm on Wednesday April 6, 2011:

    1- yes I do file quarterly. a payment was sent in after I filed and this is another possible source of the problem.. Half of the IRS folks told me that any return coming in that is not due a refund gets shelved until May/June, and a few others have told me that they will start to process it after payment is received.  If the later is true, I could see my transcript on Monday and can shed some light on this for others that may be in the same situation.

    I don’t know about answer 2 but I think EVERYONE sells them, don’t they?  it’s my understanding that this is why all institutions are now requiring the transcripts. But my knowledge in this area is weak.

    I am working on an extension from the seller but it’s tough because the IRS can’t guarantee when I’ll have it.. two days or two months.  I don’t want to string the seller along either.

    It’s out of the scope of the original comment/question, but if the government shuts down on Friday this all may be moot anyway.

  1. Anon said at 2:23 pm on Friday April 8, 2011:

    I talked to my Prosperity Mgt loan officer about this and he said that IRS transcripts should not be necessary in this case if you filed quarterly and have proof that you filed your return.  So unless there is something else at work here, I would advise you to talk to another lender asap.  I can refer you to my guy if you want another opinion.

  1. OP said at 7:28 pm on Friday April 8, 2011:

    I’d be curious if they’ve done any loans in the last few weeks without them as this is a fairly new regulation and my loan officer thought the same thing until the FHA put the final word in, which was “no deal”.  It’s ultimately FHA’s call. As far as I’m aware, most other private lenders have followed suit. I’ve tried two other lenders and they’re saying the same thing.

    If anyone has secured a loan without transcripts for this past year of income, I’d love to know who is still making those loans.

  1. Corey said at 10:47 pm on Friday April 8, 2011:


    Finally, someone who is going through the EXACT bullsh$t!  I was just told by the sellers’ banks that we have to close by April 21st, b/c they refuse to give us any more extensions for these transcripts! I have no idea what to do, and am getting so desperate.  And most of all, I am OVER calling the IRS every single day, and getting a different answer every single day!!  This has been the most frustrating experience!  If you find out who is securing a loan without transcripts, please let me know!  Please!

  1. OP said at 12:20 am on Saturday April 9, 2011:

    sorry Corey :(

    Just make sure you’re paid up.  The only *sort of* consistent answer I’ve been getting via phone with the IRS accountants, tax lawyers and advocates is that they will post 2-3 weeks after your payment posts OR in May-June AFTER the refund-due returns have been processed.  The language in their systems is unclear as to whether there is a “whatever happens first” part.. so they haven’t been able to tell me for sure.  You can try filing a 911 with the tax advocates but they can take 10 days to get back to you.  one told me not to bother, and then one other one said they could probably help- if you’re about to suffer economic hardship they can step in- but again it remains a mystery if speeding up processing is one of the things they’re actually able to do. If they call me back soon I’ll be happy to update you on that conversation.  By this monday or next monday I SHOULD also be able to let you know if it’s the 2-3 weeks post-payment OR if it’s going to be May/June.

    But if you’re not closing until the 21st, you may be okay.  I literally just need to walk into closing with the transcripts in hand.. no lead time is really necessary. I’m supposed to close on Tuesday and if my transcripts show on Monday I’ll still be okay.  Just make sure your loan is ready to go pending ONLY those transcripts.

    The IRS’s system updates on Sundays.. so while calling every day leads to different conversations, if the transcript is not there on Monday it won’t have a chance to be there again until the following Monday.

    I walked into the DC office and someone there wrote me a letter stating that they expected my transcripts by a certain date- it won’t help with the loan but maybe you can get something like that to help ease the seller’s minds.  The thing is, MANY people are in this situation.  The house already fell through once because of this before me and there’s no saying that the sellers wouldn’t be right back in the same situation with the next buyers.  At this point, even if it is May for the transcripts, chances are the sellers wouldn’t find another buyer and get closed before then anyway.  Or at least this is what I tell myself to feel better..

  1. Betty said at 4:45 am on Saturday April 9, 2011:

    I am in the same boat. Waiting and waiting for transcripts for underwriting. It’s the only thing that’s holding up my mortgage loan. Finally the LO called me to say he was sending me to another lender whose underwriter said she’d accept a stamped return and a statement from IRS saying my return had not been amended at this time. I pray it works out..I’ve been assured that this mtg company can close me in 7-10 days.

  1. Anon said at 1:42 pm on Saturday April 9, 2011:

    all I can say is that I presented your situation to my Prosperity Mortgage (Wells Fargo) loan officer and this is what he said, and I quote:

    This isn’t an fha thing, so it’s not “FHA’s call”. This is required on all loans - fha and conventional.  And it’s not a new thing either.

    If the IRS hasn’t processed a buyers most recent returns we will pull the prior year’s return and will need to see proof that she filed for 2010.

    My advice would be to talk to another lender until you get one who is willing to do this for you. If you want to speak to my guy I will be happy to give you his contact info.

  1. OP said at 5:18 pm on Saturday April 9, 2011:

    I’d love to talk to someone else.  I had a call out to WF but two attempts later they have not gotten back to me.  I think others would also appreciate any contact info and help they could get too.  Thanks!

  1. Anon said at 11:50 pm on Saturday April 9, 2011:

    his name is Ryan Dailey and I highly recommend him.  Email Ryan at:    .(JavaScript must be enabled to view this email address)

    If you do contact him, mention that Doug referred you to him so he will have some context for your question.

    Good luck with your purchase in any event.

  1. OP said at 11:00 am on Monday April 11, 2011:

    it does indeed sound like Wells Fargo can do the loans without the transcripts- just talked to the original WF lender that I had started but did not finish the process with.  No one is able to say they can guarantee anything at this point but for some it may be worth a shot. Thanks so much for sending the info.

  1. OP said at 3:32 pm on Wednesday April 13, 2011:

    ok, so here are some final breadcrumbs for folks to follow.

    If you’re self employed, make sure you pay right away.  You’re probably looking at a minimum normal processing time but if there is an outstanding balance your return will not be processed until payment has been posted.  it takes 2-3 weeks to post and then can take another 1-2 weeks to show up in their system.

    If you wait to pay they won’t process your return until after refund-due returns are processed so you’re looking at May-June before your transcripts are available.

    Wells Fargo.. at least the LO I talked to, in the end, could not do the loan without the transcripts.  One other LO at another branch WAS able to do a loan for a friend who is self employed stating that because it was before April 14th, they couldn’t expect her to have them yet.  This is all 2nd hand info but the story I got. I would NOT count on this being normal.  She may have gotten lucky.

    Tax advocates.  They can help speed things up *maybe*.  I was asked to send them my signed return and they were going to resubmit it and it would take a minimum of a month.

    As for me.. closing tomorrow.  Transcripts finally came through yesterday.

    Hope all of this can help someone out there.  Pay the IRS immediately if you’re trying to get those transcripts!

  1. Chris said at 2:49 pm on Wednesday April 27, 2011:

    Has anyone else been successful with receiving their transcripts prior to all of the returns being processed. I am in the exact same boat…..waiting to close on a house and without the transcripts I am unable to. I have pushed the closing to May 20th, but still unsure if that is long enough. I did pay the full amount owed and did e-file my taxes by Feb 16th.

Comments are closed.

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