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Income from side work

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Thare520
New Member

Income from side work

My wife and I have a side cleaning business.  In 2013 we made just over $16000 in cash along with $12000 in 2012 (I claimed the 2012 income as a Household Employee).  We won't be receiving any 1099's even though we made more than $1800 from most of out clients.  We are looking to purchase a new home in early 2015 and we want this income to be included when the lender looks at our income.  I'm on TurboTax and considering counting the income as income earned as a household employee as opposed as a seperate business income because it's less of a tax hit.  Would the income be considered in the decision if I do claim it as a household employee?  Thanks.

Message 1 of 8
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ShanetheMortgageMan
Super Contributor

Re: Income from side work

Where does the income get reported on your tax return?

 

I found a lot of information pertaining to employers of household employees,such as http://www.irs.gov/publications/p926/ar02.html ... but not much on where the household employee would report such income.  Do you report it under "Wages, salaries, tips, etc." on form 1040?

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Message 2 of 8
Thare520
New Member

Re: Income from side work

On Turbo Tax it's being reported under Misc. Income but it included in my total income when I look at my 1040.  My real concern isn't how to claim it (to be honest, if we weren't house hunting next year I wouldn't claim it at all), but to make sure my lender looks at it when considering our income.  My wife and I both have part time jobs and the income from those two jobs wouldn't get us much of a house.  The $16000 would make a giant difference.

 

 

Message 3 of 8
ShanetheMortgageMan
Super Contributor

Re: Income from side work

Misc. income?  Do you mean "other income"?   It seems TurboTax has kind of a layman's way of completing the tax return rather than referring to the actual forms.

 

Here is what Form 1040 looks like:  www.irs.gov/pub/irs-pdf/f1040.pdf

 

To make it easiest to qualify with, I'd recommend you file it as Schedule C which looks like www.irs.gov/pub/irs-pdf/f1040sc.pdf

Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 4 of 8
Thare520
New Member

Re: Income from side work

I believe you are correct.  Do the lenders looks the past years Schedule C or do they need a couple of years worth?  I though I read that if your Schedule C income goes up form the prior year they will average the two years.  If the income goes down, the will take the lesser of the two.  Thanks for your help.

Message 5 of 8
ShanetheMortgageMan
Super Contributor

Re: Income from side work

Schedule C income is considered self-employment, so a 2 year average is used if the income is increasing (mostof the time will only use the most recent year if it's decreasing).  Since you said you were going to buy in early 2015, and if you haven't filed 2013 returns yet, you can file the Schedule C on your 2013 & 2014 returns and have the 2 years worth that way.

Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 6 of 8
Thare520
New Member

Re: Income from side work

Thank you very much.  Just the info I was looking for.

Message 7 of 8
HouseBuyerGuy
Established Member

Re: Income from side work

Since it's an actual business venture, it should be reported as such. Need 2 years. Then I guess after you close on your house you can continue with tax evasion/fraud and let the rest of us pick up the slack.

 

Good luck with the house hunt.


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