Changes to 2022 IRS Forms for Credit Analyst’s Global Tax Return Analysis
I just opened up my new 2022 Forms to see what the Internal Revenue Code has been up to in modifying the forms. As I frequently say in tax return analysis training for lending and credit professionals,...
View ArticleLenders and bad debt expense: Add-back? Red flag?
Erik’s question: Given an accrual tax return, in what scenarios would you recommend actually including bad debt expense? Linda’s answer: How will you know that they have bad debts? First, note that you...
View ArticleWhen to count capital contributions for global cashflow
Tim’s question: Our borrower shows a cash contribution of $200,000 on the 2020 tax return and a distribution on the 2021 tax return for $21,000. Would it be acceptable to net these two numbers and...
View ArticleManager Update: Tax Return Analysis in this Challenging Lending Environment
Get Your Team ReadyLinda’s briefing focused on the biggest challenges in tax return analysis now and how you can get everyone on your team:From over-reliance on spreadsheets and software to...
View ArticleAmortization in Tax Return Cashflow Analysis
Linda’s question: Yes, today this question is one that occurred to me as I was reviewing a tax return. Why is there amortization on patents and other intangible property sometimes, but not always? And...
View ArticleManager Update: Clear Up K-1 Confusion
Clear Up K-1 ConfusionWhen your focus is on an individual borrower or the guarantor for a business loan:How does the 1040 help you with K-1s? (Hint: Passive vs NonPassive is a clue)Which lines on the...
View ArticleManager Briefing: Red Flags and Green Lights in Tax Return Analysis
Wednesday, February 22 8:30 AM PT / 11:30 AM ET Manager Update followed by a Q&A Session. Limited to 20 Attendees The post Manager Briefing: Red Flags and Green Lights in Tax Return Analysis...
View ArticleRisk Appetite: The Battle between Lending & Credit (and how both can win) |...
Lending and Credit have a different outlook on risk. Sometimes it seems like a battle. And yet, both groups need a volume of performing loans to carry the day. Today we’ll look at how risk appetite,...
View ArticleWhen should capital contributions be deducted from personal cash flow?
Tim’s question: Typically when I see a distribution along with a capital contribution on a K-1 I’ll net the two numbers and input the net number in the personal cash flow. What if there is no...
View ArticleWhat is the difference between amortization and depreciation?
Most lenders and credit analysts learn early on to add back depreciation to determine the cash flow available to pay debt and the owners. Shortly thereafter, you learn that amortization is treated in...
View ArticleWhen Entity Compensation of Officers does not match 1040 wages
Carmen’s Question: When an entity pays out “compensation of officers,” is that shown as wage income to the officers? I don’t feel that I have been able to directly correlate those items, and feel they...
View ArticleDoes adding back Section 179 ‘depreciation’ overstate global cash flow?
Your question: Several of our analysts believe that 179 deductions should be treated like depreciation because it is an election to take the expense rather than capitalize the expenditure and...
View ArticleLender Depreciation Add-Back? It depends on where you find it
Catherine’s question: What is the depreciation figure on the 1065 Schedule M-1, Line 4a for? I don’t see that we ever look at this figure to “add” back. Has this already been calculated into the...
View ArticleHow Does Special Bonus Depreciation Impact Cash Flow Analysis and DTI?
Chris Asks: I’m curious how special bonus depreciation impacts cash flow analysis and DTI (Debt-to-Income Ratio)? I believe it ended on January 1st but it seems like I may be seeing it on 21 and 22...
View Article1065 K-1 Withdrawals Do Not Match Distributions
Danielle’s Question: I attended your Manager Briefing – Clearing up K-1 Confusion (access the video here). I have a question regarding a recent K-1 I received. From the 1065 K-1: Item L Withdrawals and...
View ArticleHow to reconcile tax returns to financial statements
Kritine’s Question How do I reconcile a P&L to the previous year’s return to be sure the current income is on track? I’m fine calculating S/E income of all types, but sometimes a P&L comes in...
View ArticleShould You Include Non-Operating Income in EBITDA?
David asks: Should EBITDA include non-operating income and expenses or not? I have received conflicting information regarding this. The post Should You Include Non-Operating Income in EBITDA? appeared...
View ArticleConflict between S-Corp Ordinary Income and Owner W-2 Wages
Amanda asks: Should I use W-2 Wages for cash flow when ordinary income on a k-1 is negative? The post Conflict between S-Corp Ordinary Income and Owner W-2 Wages appeared first on Linda Keith CPA.
View ArticleGuaranteed Payments to Non-Owners
Fred Asks I have a customer who reports guaranteed payments on their 1040 Schedule E. However, the partnership tax return info indicates the customer does not have any partnership interest. All of the...
View ArticleCan we use Distributions from Equity rather than from Earnings?
Tony Asks: I used distributions from owners’ equity as part of the cash available for personal debt service of the owners of a law firm. The firm had a large settlement 2 years ago which continues to...
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