“The Cash Economy”

Anyone in the mortgage business will cringe when someone says, I run a cash business or I get paid in cash or I pay my bills in cash. The cash economy is alive and well in each and every country in the world and no different in the US.

Two years ago Tony came to me for a mortgage and I couldn’t help him at the time. He owns a pizza restaurant and showed very little income on this tax return, even though he was driving a new Lexus and substantial savings. At the time I sent him to the bank where he had his checking account, still no luck.

It was Jan. 2012 when I sat down with him and his accountant to discuss what his income needs to be for Tony to be able to qualify for a mortgage in 2014. I thought the two would go into cardiac arrest. Tony was of course concerned about how much he would have to pay in taxes and the accountant’s concern was  the IRS, after showing a dramatic increase in income.

So far Tony has survived the 2012 tax return and is now going to file the 2013 returns. Once these returns are filed we will be ready to purchase a home.

In situations like this, communication between a self-employed individual and their accountant is vital. If the CPA was not aware of Tony’s need to obtain a mortgage in the future, it would have been impossible to obtain a mortgage, especially if the tax returns continued to show very little income.

As a side note Tony’s CPA has referred two other clients to me over the last year that are in similar situations.