CPA letter for self-employed income: mortgage, Medicaid, immigration, landlord

• Tax return preparation letter. Confirms that we prepared and filed your federal returns for named years. This is the simplest letter and the one lenders ask for most.
• Self-employment verification letter. Confirms that your business exists, its legal form, and how long you have reported self-employment income on your returns.
• Income verification letter. States the income shown on your filed returns, such as Schedule C net profit or the wages and distributions from your S corporation, and names the documents we reviewed.
• Year-to-date profit and loss statement. When the requester wants current-year income, we prepare or compile a P&L from your books with a CPA report that says what level of service we performed. See financial statements.

A CPA can confirm facts the CPA knows from the work performed. For example: we prepared your returns, the returns show a certain amount of income, and the figures came from information you provided.

A CPA cannot:

• Assure solvency or ability to repay. AICPA attestation standards (AT-C section 105, Interpretation No. 1) prohibit a CPA from giving any assurance that a business is or will stay solvent, including whether it can make debt payments.
• Predict future income. A letter should not say your business will stay profitable or that income will continue.
• Call unaudited numbers accurate. If the CPA did not audit or examine the figures, the letter should say so.

We also need your written consent before we share tax return information. Federal law (Internal Revenue Code section 7216) restricts what a tax preparer may disclose without it.

Mortgage lenders. Under Fannie Mae’s Selling Guide, lenders generally document self-employed income with signed personal tax returns for the past two years, or IRS transcripts, and sometimes business returns. One year can be enough when the business has existed for five years and you have owned 25% or more for five years. A CPA letter supports the file; it does not replace the returns.

Medicaid and Medi-Cal. Federal rules require state agencies to check income with electronic sources such as the IRS, SSA and state wage data first. Agencies may ask for documents only when that data is not available or does not match what you reported. Self-employment income does not show up in state wage data, so self-employed applicants are more likely to be asked for documents.

Immigration (Form I-864). USCIS asks for an IRS transcript or copy of your most recent federal return, including every schedule, such as Schedule C. You may add returns for the three most recent years. If you did not file a required return, you must file it first. See unfiled tax returns.

Landlords. There is no standard. Ask the landlord or property manager what they need. A short letter confirming self-employment and income from your last filed return, plus bank statements, is a common request.

Best for: sole proprietors, 1099 contractors, LLC and S corporation owners who need a letter for a lender, landlord, benefits agency or immigration case.

1. Free initial consultation. Send us the request or form and tell us who is asking.
2. Fees quoted upfront, in writing. Transparent, fair fees before any work starts.
3. Consent and documents. You sign a consent to disclose and send your returns, transcripts, bank statements and current books.
4. Review. We review the records and, if needed, bring books current and prepare a year-to-date P&L.
5. Letter. We issue a letter on our letterhead that states the facts, the documents reviewed and the limits of our work.