What Taxes can i write off being an independent loan officer but recieve a w-2?

Question

I am an ILO (independent loan officer) Basically I run my own business under a companies license and name, but i recieve a w-2 at the end of the year for taxes. Being that I am independent i pay for all advertising, business expenses, mileage to meet with customers and so forth, just like a regular business. I have heard that you can not right off expenses though because i am a w-2 employee like you can if you acutually opperate under your own business lic, name, and tax number. What should I be prepaired for in April 07!

To expand on the above, I have looked at opening my branch through another company. They told me they have set up expense accounts. I am still paid as a w-2 employee but that all my expenses are paid pre-tax. Are there any disadvantages to that option? I think i may make too much 80K plus being single that the 2106 form may not work for me? If I had the option to go 1099 would that work best?

I have tried to consult with different cpa's in my area and no one is willing to help unless i pay a big fee because i am not a current client. If i could only find a cpa who would give me advice that they would want if they were in my shoes, i would use them for as long as they were in the industry.

Answer 1

Usually receiving a W-2 at year end does not imply independence like recieving a 1099 Misc would. You should be able to deduct your non-reimbursed employee expenses on form 2106 (http://www.irs.gov/pub/irs-pdf/i2106.pdf ). The problem with being paid as an employee and recieving a W-2 is the amount of expenses added up on form 2106 are then carried to Schedule A to see if they "can" be deducted. So for starters you need to itemize and it will only be picked up on schedule A as a deduction if it's in excess of 2% of your AGI (Adjust Gross Income).

I have a loan officer that I do this now for and between and her and her husband their income is to high and they do not get a deduction for her expenses which amount to around 7,000 or 8,000 a year.

You may talk to your employer about getting paid on a 1099 basis rather than as an employee and claim all your income and expenses on a Sch C (as a business). I have a mortgage company now that uses another mortgage company to originate loans so I think it would be okay if you were paid on a 1099 basis and have the loans were orginated under the company name of your employer. Otherwise you may run the risk of loosing all deductions. Of course doing so would have to provide a benefit or it wouldn't be worth doing.


I know there are also certain rules for certain loans such as HUD loans and not allowing them to be done by a subcontractor which is what you would be if paid on a 1099 basis. You would have to verify the exact rules if you handled these kinds of loans. You would need to find out what impact being paid as a subcontractor would have on you.

Aside from the compliance rules that may apply to you, it depends on much you are making and what the tax benefit would be. There are other things take into consideration as well. Such as SE (Self Employment) Tax which is what you will pay instead of having taxes withheld. Also, are you recieving insurance benefits from this company? If yes, you may need to stay on as an employee. Typically an employee doesn't receive a W-2 and a 1099 from an employer because the employer may run into issues with the IRS.

Before you do anything I would consult with an accountant in public practice who can determine the exactly what would benefit you the most. Good luck!!

Answer 2

Independent Loan Officer

Answer 3

I would suggest you do some research at www.irs.gov
read Publication 17 in this area. It will refer you to other publications which might give you some details.

I think you are probably in a good position that you get a W-2 because the IRS was supposedly looking closely at all those 1099's that would go out and were trying to determine if any of them should actually be W-2s.

I would think the 2106 form would be your best bet. Most salespeople use that.