New Side Business, Taxes etc.

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    Hi I have a full time w-2 job and became NACA qualified using it. I started a new business (Sole-propietor LLC) in June 2019 that had several start-up expenses (which were all before I started the NACA process in September). No business revenue yet because I had so much going on and was trying to get through this NACA process without confusing the issue financially.

    Now that I’m not going to be able to close on a home before the end of the year, I want to make sure I don’t do anything to screw up my qualification or prolong this process any further, so I have some questions. I’m concerned about reporting a business loss on my taxes for 2019 and how that will effect my NACA qualification. If I close before April will I have to submit my 2019 taxes before closing? Will reporting a loss on my taxes make a difference to NACA?

    I also want to start taking on clients and making some extra money on the side come 2020. I will still have my full time w-2 job used for my NACA qualification. Wondering if I can use the extra money I make on the side for MRF or Buy-Down? Will I have to submit my business bank statements?

    So many thoughts running through my head. I just don’t want to mess things up with my NACA process, but I also don’t want to keep holding off on actively running my business either. @TTrumble can you provide any insights for me please?


    My thought is that your startup will definitely be an area of question but shouldn’t be counted as your income. You should be qualified based on your full time job only. Your startup income could count toward mrf and buy down just not payment shock because you have less than 2 years. Any debt however might count against you. As long as you count this solely as extra savings and don’t plan on using it as a means to qualify for a higher loan amount you should be fine.


    Thanks for you input @nelsont, I hope so. There isn’t any debt for the business right now, just startup expenses that I paid for and haven’t yet recouped because I haven’t had any revenue generating clients yet. I want to consider everything that may have an adverse affect on my qualification. Business wise, I know I’m doing everything properly by having separate accounts. NACA has so many unknowns though. Hopefully @TTrumble can weigh in as well.


    Hi, just checking in again to see if Tim can provide any insight. Thanks! @TTrumble


    Hello LyricL,

    NACA’s Policies and Procedures state, “W-2 Income is not to be reduced for business losses incurred through other business activities that minimize tax liabilities (i.e. homebased businesses, hobbies, etc.), and it should not be reduced by unreimbursed employee expenses filed as itemized deductions on the tax returns.”

    Tim Trumble
    Online Operations, NACA


    I am starting my new business and for that, I am searching for tips online. I am very much thankful to you for sharing this useful information with us. I also want to know how a student can dive into entrepreneurship and I am glad I have found website. After reading your post, now I know how to start my business and I will also take care about taxes too.


    Please kindly advise @ttrumble or @nelsont:

    My husband also has a new business. At first, he used our personal bank accounts for his computer selling because he wasn’t aware at the time that he needed a separate account. Business is picking up fast. Now he has a separate account for his business and an EIN. He is self employed as of this year and plans to file his business taxes for 2021 during tax season (February 2022). I’m working on doing the LOE letters but I’m stuck on these Business transactions. They are pretty big lump sums moving between accounts. Such a headache! Will it throw up red flags for the underwriter. How do I do an LOE letter for these business transactions on both our personal accounts and his business account? I saw something about labeling the bank statements BD or BW. Is that all we need to do for his business-related transactions since we are not using the business earnings toward income (only the MRF)??

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