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How Do You Prove It?

by Nathan Hangen
13 replies
Ok, so I am going to be making the change from having a J-O-B to beign a full time internet marketer and entrepreneur very soon, but there are a few things that worry me.

When buying a house, car, or anything else, I was always able to provide detailed documentation to prove my income. Once I leave, and all my money goes through paypal, I'm worried that it won't look right.

What do all of you full time IM'ers do to prove income for loans and credit purposes? I'm sure filing it in your tax return helps, but that isn't ever good enough for lenders and they are easy to pad.

I don't want to be stuck without a place to live when I move to Florida here shortly. Any ideas or discussion would be great.

Thanks,

Nathan
#prove
  • Profile picture of the author Steven Carl Kelly
    I've always used my tax returns when actual "proof" is required.
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  • Profile picture of the author Nathan Hangen
    I don't know about you, but when I bought my house, I needed more documentation than I've ever needed for anything in my life. Pay stubs, tax returns, all sorts of stuff.

    Anyone can pad a tax return.
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    • Profile picture of the author sylviad
      Don't overlook your PayPal account details. Print out your monthly statements showing all your sales and income. If that's your only source of income, use that to fill out our IT return. It's pretty hard to fake your PayPal account record.

      Sylvia
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  • Profile picture of the author Shannon Tani
    I'm very interested in this too. Right now my income comes solely from IM and freelancing. My husband has a job. We want to buy a house in about a year and a half, but in a different part of the country. That means that hubby will no longer have his job.

    In the past, I think that people in our situation would have gone for a no-doc loan, but I doubt that banks are giving too many of those out nowadays, regardless of how good your credit score is.

    I'd love to hear from others with more experience.

    Love,
    Shannon
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  • Profile picture of the author onlinemlmrockstar
    Tax returns can prove your income, so you would need to declare all cash sales if you want a higher credit approval.
    If you are making money, banks will want to lend to you, no worrys.

    Christopher Reid
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  • Profile picture of the author lynwil
    Very good advice here. Tell me, since I haven't been at this to long, at least not making that much money, how does all this relate to paying ones taxes?
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    • Profile picture of the author Dixiebelle
      The best way to achieve credability is to have a tax accountant fill out your return. A lender will accept a professionally prepared return as factual.

      A good credit report doesn't hurt either. It proves that you can pay your bills on time.

      Dixie
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      • Profile picture of the author ExRat
        Hi,

        Not sure how it works for you elsewhere (I'm in UK), but if you don't have an accountant, you should still be logging your in/out details in a CSV or something as your 'books' for tax purposes.

        Coupled with a matching tax return to prove that the figures are genuine, you should be sorted.

        Over here (UK), for property purposes (particularly renting) if you can show a bank statement with regular incomings of the right level, that often does the job.
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        Roger Davis
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      • Profile picture of the author bgmacaw
        Cash gets a lot of respect, such as having 25K or more in reserve in your bank account. I do recommend have a good bit of liquidity and emergency funding, no debt, plus good health and disability insurance if you live in the US, before you out on your own. Pay cash for everything, including a car, as much as you can. If you feel the need to get a car loan, put down 40% or more of the value and you probably won't have much trouble getting a loan. For a house, a lot of cash upfront also talks.

        Don't leave too much in PayPal. I leave enough for expenses, like hosting and minor purchases, and to cover potential chargebacks, usually around $1000-$1500, but the rest I transfer out quickly. PayPal can lock down an account and kill your cash flow so you have to be careful in how you use them.
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        • Profile picture of the author Scott Moody
          Having been 'self-employed' most of my adult life, its always fun to apply for a home loan.

          You can forget about the good old 'No-Doc' or 'NINJA' (No Income No Job or Assets) loans. They are probably gone for good.

          Treat you Pay-Pal just like any other bank account. Most lenders will average out your last 2-3 years tax returns for loan amount qualification. But they will want verifiable bank/pay-pal statements to validate your income sources and amounts.

          They advise above about keeping very little money in Pay-Pal is a must for all of us. Also, a good amount down is probably a necessity.

          Personally, I would get in contact with a few lenders where you are going to living. Its best to start a good dialogue early to find out what is really happening in the local market.

          Of course, I am moving this summer to a new state. But, I am not going to buy right away, I plan on renting an executive level home for the first year (at least).
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  • Profile picture of the author Nathan Hangen
    Great advice everyone. I guess I need to get hot on printing out my paypal transactions and keeping better track of my accounting.

    I'm in the process of setting up a business bank account and all that stuff, but in the meantime I try to keep as little in my Paypal acct. as possible. They don't pay any interest anyway

    I'm still a little worried about the move, but I'm sure it will work out in time.
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    • Profile picture of the author sylviad
      Originally Posted by nhangen View Post

      Great advice everyone. I guess I need to get hot on printing out my paypal transactions and keeping better track of my accounting.

      I'm in the process of setting up a business bank account and all that stuff, but in the meantime I try to keep as little in my Paypal acct. as possible. They don't pay any interest anyway

      I'm still a little worried about the move, but I'm sure it will work out in time.

      >>> I don't know how it is in the US (or wherever you are), but in Canada, you don't need a "business" bank account as such. Banks charge significant fees for those. All you need is one bank account that you use strictly for all your business transactions. This is especially true if you go with your name as your business name.


      Originally Posted by lynwil View Post

      Very good advice here. Tell me, since I haven't been at this to long, at least not making that much money, how does all this relate to paying ones taxes?
      >>> Regardless of how much you make, you have to keep track of all the money you earn and all the money you spend on your business. When money is slight, it's best if you pay out as much as you bring in. That way, you avoid having to pay taxes because you can write off a whole bunch, like software, business books, computer costs, hydro, your internet account, hosting services, auto responder services, business-related courses, business site membership fees, products you purchase to resell, web design services.... the list goes on...

      You have to be able to prove that all those "costs" were strictly for your business. In other words, you can't charge 100% of your computer costs if you use it half the time for personal stuff. In that case, you can only claim 50%.

      If you don't do this tracking, you can get in serious trouble with the tax people, especially when you start making good money. They look for drastic changes in your reporting as they begin to wonder why you are now claiming an income of $1 million and last year you only claimed an income of $30,000.

      Sylvia
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  • Profile picture of the author homeloans
    Banned
    Why don't you say that I am self employed then show your bank statements and show your credit score. I think its enough to get home loans. If You want to get anything then all this will work for you.

    Good Luck
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