Inaccurate Mortgage Applications

Hi June,

I'm on my 4th year of owning a marketing firm as a sole proprietor & work from home when I'm not traveling for business.

I just bought my first home and had to make certain my adjusted income on my 2007 tax return was high enough to qualify for the mortgage. So in order to achieve this I did not write off thousands of business expenses on my return and owe A LOT. Someone suggested I send an addendum to the IRS on my return to lessen what I owe now that I have the new house. Should I do this or would this trigger an audit?

Help! I want to do the right thing for my hard earned money!

Thanks in advance - Ali (Texas)


Dear Ali,

You have probably heard the adage: You can't have your cake and eat it, too. Well, in the same way, you can't have high income for one purpose and then lower income for tax purposes.

When you applied for a mortgage you probably signed a form that allowed the lender to request copies of your tax returns from the IRS. In a bank audit, the auditors can get a copy of a borrower's return from the IRS and compare it to the return presented by the borrowed during the application process. You cannot file a return with one set of numbers to the IRS and another set of numbers to the lender. Well, you can but it can get you in big trouble.

-- June