Those who know about getting loans.

[caryrae]

I and a few of us work for a guy who went out on his own and has his own little business. We install ceramic tile and the company we did work for didn't keep us very busy but anyway. It is just 4 of us so instead of doing the traditional paychecks he is 1099 us at the end of the year so we have to worry about saving for our own taxes, which is not a big deal. What I was wondering is when it comes time to buy a new car, get a home, ect and they ask for recent paycheck stubs is there anything else I could show them? We just get paid basically with what just looks like a personal check with the business name and info on it so I don't get a paycheck stub.

[offwego]

a 1099 means your a contractor or self employed. Generally you'll need to provide a min. of two years income tax returns to verify the amount you earn (as unlike salary it could vary year to year despite working for the same general contractor).

For "recent" employement verfication copies of the cheques prior to your deposit should be sufficent or bank account records of deposits.

[d_m_n_n]

DH is self-employed and our income can fluctuate greatly from one year to the next. Whenever we go for car loans, etc we are always asked to provide the previous 2 years of taxes. I've never had to provide any kind of employment verification, so I'm not sure what you would need to do for that.

[Missy_Mouses_Dad]

The employer must keep some kind of a ledger for payroll tracking. He is responsible for taxes also and has to prove out the amounts he pays. You should be able to "query" against these records to get your information. Hopefully he is using a computer for tracking which would make it much easier for you. Good Luck.

[caryrae]

Thanks guys. I don't need any loans yet but eventually the time will come.

[crazypoohbear]

The employer must keep some kind of a ledger for payroll tracking. He is responsible for taxes also and has to prove out the amounts he pays. You should be able to "query" against these records to get your information. Hopefully he is using a computer for tracking which would make it much easier for you. Good Luck.

I believe that if they are "contractors" then he is not responsible for taxes. Getting 1099 means they are technically self employed and therefore responsible for their own taxes.
but the 1099 should be proof of wages for any loans.

[Jeff G]

A couple other things to consider with 1099, you will pay not only your income taxes but also your own deferred and social security compensation which takes away part of your income. A benefit of 1099 is that you are considered self employed and you are able ot find more deductions on your tax returns vs. W2 employees.

The reason I mention all of this is when it comes time for a mortgage and loans many 1099 employees have a hard time qualifying and are shocked. The main reason is you are self employed and will need two full years tax returns to verify income. The income used for 1099 is then based on a 2 year net average off of the business, meaning the deductions for the taxes and other items you deduct will reduce your income in the eyes of the loan company. For example, if you make $30,000/year on a W2 we use $2500/month for income, very simple. The same person on a 1099 making $30,000/year gross on average the past two years will most certainly will be given a lower income. To calculate income for someone on a 1099 we take the net income from business off of your tax return which means the income tax you pay and deduct, the social security you pay and deduct along with any business deductions reduce your income. To compare to the person above who made $30,000/year if a 1099 person comes to me with the same gross income I then turn to their tax returns. Say the person now has a modest $5000 in business related deductions I'm looking at the bottom line net income of $25,000/year. The person on the 1099 who made the same gross is now being given credit for a much lesser income vs. the person who is W2. Many 1099 employees take full advantage of being considered self employed and deduct as much as they can not realizing when it comes to mortgages/loans they are showing very little to no income for their business and have a hard time qualifying. Another negative it that we use a two year average off of tax returns meaning even though we are in August of 2008 were looking at the average income from 2006 & 2007. The YTD this year means very little because we don't know what the deductions will be. When it comes to car loans it may not be as hard to qualify but in the new mortgage market this can and most likely will be a burden, especially since the self employee friendly no income loans are a thing of the past.

Just a FYI ~ I would double check with an accountant to make sure he can put you 1099. 1099 was inteded for contractors with income coming from several sources and not committed to the one company. Many small businesses went to 1099 to avoid the expenses of being an employer but really didn't qualify, one of the bigget benefits is they don't pay the employers social security portion you do. The only reason I bring this up is because the mortgage company I work for looked at putting us as 1099 but since all of my income comes from the one source we were not allowed to.

[Jeff G]

I believe that if they are "contractors" then he is not responsible for taxes. Getting 1099 means they are technically self employed and therefore responsible for their own taxes.
but the 1099 should be proof of wages for any loans.


You are correct in the first part, a 1099 person is responsible for ALL of their own taxes and most are requierd to pay quartely taxes.

As for loan purposes, a 1099 will not be considered the income since they are now self employed and will have deductions on the tax returns. See my above post.