Cash Flow User Guide SAM Method

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1 Cash Flow User Guide SAM Method Table of Contents Page 1 of 29

2 Introduction... 3 Objectives... 3 General Features... 4 Default Two Year Average... 4 Repeatable Groups... 4 X Exclude from Calculation... 5 Manual Override... 6 Red Formatted Cells... 7 Source Document Referencing... 7 Recurring and Non-Recurring... 7 Tabs on your workbook... 8 Cover Page... 8 Summary Sheet... 9 Transcripts Comparison Income Calculation Worksheet Main Sheet Schedule C - Sole Prop Schedule E Rental Income Worksheet (For Schedule E or Form 8825) Schedule F - Farm Income Trust Income Analysis Partnership S Corporation (1120S) Corporation Income Analysis Page 2 of 29

3 Introduction Welcome to the Cash Flow Analysis User Guide - SAM Method. If you looking for documentation on how to upload and download documents from LoanBeam, please refer to This guide will assist you in understanding how the cash flow is laid out, highlighting some specific features that may be built for your firm. Objectives After reviewing this guide, you will get familiar with: 1. LoanBeam Cover Page, Summary Sheet and the cash flow summary page called the Main Sheet 2. How to enter Wages from Pay Stubs in Income Calculation Worksheet tab 3. Reviewing details of each entity like for Transcripts Comparison, Schedule C - Sole Proprietorship, Schedule E Rental and Schedule F Farm 4. Trust Income, Partnership (1065) and S-Corporation (1120S) Income from K-1 s and Adjustments from corresponding Form 1065 and Form 1120S. 5. Income from Corporation (Form 1120) First, let s understand how some basic features will work, like: 1. Default Two-year Average 2. Repeatable Groups 3. Exclude from Income 4. Manual Override 5. Source Document Referencing 6. Recurring/Non-Recurring Dropdown Icons Defined Keys Key aspects of critical features Tip Best practices and shortcuts Notes Information about features Caution Important warnings about a feature Page 3 of 29

4 General Features Default Two Year Average This workbook includes the automatic calculation of 2 year (24 month) averaging. The workbook compares the Current Year (CY) income to Prior Year (PY) and computes more conservative value based on the trend i.e. if CY is lower than PY, then it will choose CY and if CY is greater than PY, then it will use the 24 month average as a default value. However, the default value can be overridden using the dropdown. See below: Repeatable Groups LoanBeam s Repeatable Group approach means that no matter how many entities are in the tax returns files, LoanBeam will dynamically create as many repeatable groups as required to present all of the entities. Whether there are two Schedule C entities or nine, the one worksheet will present them all. The totals from individual entities appear at the top, which flow back to the Main Sheet. In the Main worksheet, Schedule C income will be included in corresponding Current and Prior Year columns and QI (Qualifying Income) columns as applicable. Page 4 of 29

The amounts will be excluded from the total income

5 X Exclude from Calculation To exclude the income related to a particular entity, type X in the box as shown. The amounts will be excluded from the total income calculations and grayed out, showing the entity was considered in the analysis. Page 5 of 29

6 Manual Override Manual override columns are provided on all sheets. These may be used to amend or remove numbers. The figures entered in the Manual Override column will show up in the column for Annual Figures adjusting the Monthly Figures (wherever applicable) accordingly. There are three ways to use the Manual Override: Input a specified dollar amount Input $ 0 to force a zero dollar amount Delete an override to return to the original amount Never change the data in the CY and PY columns. When a user changes a number in the current year or prior year columns, the formulas in those cells will be corrupted, creating a potential disconnect with the rest of the calculation. Page 6 of 29

Source Document Referencing Each cell populated from a tax return provides details about the source, indicated by a red triangle in the cell s upper right corner.

7 Red Formatted Cells Overriding a cell calculated by LoanBeam results in Red Formatted cells. This creates a potential disconnect with the rest of the calculation and the relating cells are also formatted in red. Source Document Referencing Each cell populated from a tax return provides details about the source, indicated by a red triangle in the cell s upper right corner. Hovering over the cell shows the dollar amount and exact location of the data that was pulled from the tax return. Recurring and Non-Recurring There are Recurring/Non-recurring indicators that are set by default. The user can change the setting by clicking on the cell and changing the selection from the drop down. Typically, Page 7 of 29

8 Recurring numbers are included in the cash flow. Non-recurring numbers are excluded and grayed out. See Main Worksheet below. Tabs on your workbook Cover Page The first tab in the Excel Worksheet is the Cover Page. This shows the detailed Borrower information that was uploaded by the user. LoanBeam also identifies business documents that are missing from the Borrower. Based on current and prior year tax data, LoanBeam shows what information the Borrower still needs to provide. Page 8 of 29

9 For demonstration purposes, the Form 1040 s above are in separate files. That is not required. Users can scan and submit at one time all of the Borrower s documents in one or multiple PDF files with any names. The forms may be submitted in any order (e.g. K- 1, 1040, 1120, K-1, etc.) It is required, however, that within each tax form, the pages are in the same order they were produced (e.g. page 1, page 2, etc.). Summary Sheet The qualifying income from all the sheets in the workbook is presented on the Summary Sheet. The Income Category column shows the description of the line item whereas the monthly amount column populates the amount from the individual worksheets. Page 9 of 29

Transcripts Comparison On the transcripts comparison sheet, tax return information from submitted documents against manually input tax return data from the

10 Transcripts Comparison On the transcripts comparison sheet, tax return information from submitted documents against manually input tax return data from the user in matched. This easily alerts the Loan Officer or Processor to any discrepancies in what was reported to IRS and submitted by the Borrower. Page 10 of 29

All the fields on these sheets are manual input fields.

11 Income Calculation Worksheet Fixed Income Calculations or Salary Calculations as well as Variable Income Calculations for Borrower and Co-borrower can be obtained from this sheet. All the fields on these sheets are manual input fields. Manually enter the $ amounts and # of units for wages depending upon the salary types (Hourly, Weekly, Bi-weekly, Bi-monthly, Monthly or Annually). Page 11 of 29

Main Sheet The Main Sheet captures cash flow information from the Borrower s tax returns. While numbers from Form 1040 Page 1, Schedule A, Form 2106 etc.

, are broken-down into details on their own individual tabs and summary information is passed back into the Main Sheet.

12 Main Sheet The Main Sheet captures cash flow information from the Borrower s tax returns. While numbers from Form 1040 Page 1, Schedule A, Form 2106 etc., are populated directly on the Main Sheet, information from multi-instance forms like Schedule C, Rental, Partnership etc., are broken-down into details on their own individual tabs and summary information is passed back into the Main Sheet. Example of a Schedule C (multi-instance form) Clicking on the link for View Breakdown will take you to the Schedule C detail sheet. For each amount populated on the main worksheet from multi-instance forms, breakdown for amounts can be viewed. Inside the Main Sheet, there are three additional columns for your Cash Flow Analysis Qualifying Income (Annual), Qualifying Income (Monthly) and 2 Yr. Avg. or CY. Page 12 of 29

13 Qualifying Income (Annual) compares the Current Year (CY) income to Prior Year (PY) and arrives at the most conservative value based on the trend. For example, if CY is lower than PY, then LoanBeam will use CY. If CY is greater than PY, then LoanBeam will use the 24 month average (e.g. CY + PY divided by 2.). Qualifying Income (Monthly) is Qualifying Income Annual divided by 12. The right hand column displays which approach was used for Qualifying Income. Fields highlighted in aqua blue are manual entry fields. Schedule C - Sole Prop. This form populates from Schedule C form of the Tax Returns. If there are multiple entities in the Tax Return for this Form then LoanBeam creates repeatable groups to represent each entity individually on the same Schedule C worksheet. Verify the amounts populated from the Borrower s tax returns. Page 13 of 29

There is space in the Notes section to comment on the reason for manual override or any other changes

14 In case the amounts need to be changed, the Manual Override columns provide space to enter the corrections. The total annual and monthly QI figures will change accordingly. There is space in the Notes section to comment on the reason for manual override or any other changes made in the worksheet. To exclude the income from the income calculation type X in the box provided as shown in the image. Page 14 of 29

15 If it found that there is 20% or more than 20% change in income for an entity then a note indicating that current year transcripts are required is displayed. The calculated total from all the entities on this form is represented at the top of the sheet and this amount flows to the Main Worksheet. Page 15 of 29

Rental Income (Loss) Calculation The Rental Income (Loss) amounts from the borrower s/co-borrower s tax returns are populated

16 Schedule E Rental Income Worksheet (For Schedule E or Form 8825) This sheet populates the amounts from the Schedule E Rental and Royalty Income and Loss of the Tax Return. Repeatable groups are automatically created if there are multiple entities. Rental Income (Loss) Calculation The Rental Income (Loss) amounts from the borrower s/co-borrower s tax returns are populated here. By default Conventional Method is used for QI calculation. You choose to calculate the QI using Government Method. Page 16 of 29

12. This can be changed manually. Number of months cannot be more than 12.

17 If you opt to choose the Government Method then the fields related to the Conventional Calculation are grayed out indicating that these amounts are excluded from the calculation as shown below: The number of months for QI calculation of a Rental property is considered to be 12. This can be changed manually. Number of months cannot be more than 12. The fields for Monthly Mortgage Payment - P&I and Monthly Insurance, Maintenance, Taxes & Misc. (e.g., HOA Dues, Flood, etc.) are manually input fields. Input the amounts directly in these fields. Page 17 of 29

The total calculated from all the entities on this sheet flows to the top of this sheet.

18 Royalty Income (Loss) Calculation Royalty Income (Loss) Calculation is also obtained from this sheet. Repeatable groups are automatically created if there are more than one entity. The total calculated from all the entities on this sheet flows to the top of this sheet. This calculated total for Schedule E Sup. Inc. and Loss which flows to the main worksheets is used in the QI calculations. Page 18 of 29

PY columns. Verify these amounts with the amounts on the Tax Return.

19 Schedule F - Farm Income The Schedule F worksheet helps in the analysis of borrower s Farm Income. All the data from the Tax Return that helps in the QI Analysis is captured and populated in the CY and PY columns. Verify these amounts with the amounts on the Tax Return. If any of the amounts do not match or you want to manually override the amounts, then use the columns provided for manual override. Page 19 of 29

To exclude the income from calculation type X in the cell provided for X to exclude income from calculation.

20 LoanBeam automatically calculates the Schedule F Total Net Farm Income, Qualifying Income - Annual and Monthly. If there is a 20% or higher percentage change in the income then a note will be displayed. To exclude the income from calculation type X in the cell provided for X to exclude income from calculation. The calculated QI for all the entities is represented at the top of the sheet and this amount flows to the main worksheet. Page 20 of 29

To manually override use the columns provided for manual overrides.

21 Trust Income Analysis The Trust Income that is used in the QI Analysis flows to this sheet from the Tax Return. The Trust Name, EIN # and Beneficiary Name are also populated on this sheet. Verify all the figures populated from the Tax Return. To manually override use the columns provided for manual overrides. Overriding the amounts directly in the CY and PY columns will corrupt the formulas in those cells. Include notes in the notes section for such manual overrides. If required, make adjustments to the income in the cell for Other Adjustments (shaded in aqua blue). Page 21 of 29

22 Type X to exclude income from the calculation in the cell provided for the same. The Total Income (Schedule K-1) is analyzed and is displayed at the top of the sheet. This amount flows to the main worksheet. Page 22 of 29

Partnership 1065 The Partnership 1065 worksheet populates the borrower s Income from K1s and Adjustments to the income from the Partnership 1065 form of the Tax Return.

23 Partnership 1065 The Partnership 1065 worksheet populates the borrower s Income from K1s and Adjustments to the income from the Partnership 1065 form of the Tax Return. Partnership name and Partner s name also populate for each entity appearing on this sheet. LoanBeam automatically chooses the best suited method of calculation Traditional Method or Distributed Method. You can change the selection from the dropdown. If you choose to change the original method a message indicating the same will be displayed on the worksheet. The fields related to the method that is unselected will be grayed out and will not be considered in the calculation. Page 23 of 29

Verify all the figures populated from the Tax Return.

drop down to select other values from the K-1.

24 Verify all the figures populated from the Tax Return. The ownership percentage is multiplied and the QI calculations are generated. While Capital Ending is the default value, the cell offers a drop down to select other values from the K-1. The total from this sheet is presented at the top of the sheet and the amount for Partnership Total Income flows to the main sheet. Page 24 of 29

25 S Corporation (1120S) S Corporation income is automatically calculated on this sheet from Form 1120S. LoanBeam automatically chooses the best suited method of calculation Traditional Method or Distributed Method. You can change the selection from the dropdown. If you choose to change the original method a message indicating that the original method has been overridden will be displayed on the worksheet. The fields related to the method that is unselected will be grayed out and will not be considered in the calculation. Page 25 of 29

Manually input the Wages paid from S Corporation to the Borrower in the cell highlighted in aqua blue.

26 Verify all the figures populated from the Tax Return. If the amounts do not match, then use the Manual Override columns and provide a reason for the changes in the Notes section. Manually input the Wages paid from S Corporation to the Borrower in the cell highlighted in aqua blue. The calculated QI for each entity is presented on the sheet along with the total calculated QI for all the entities flows to the top of the sheet. The S. Corporation total income flows to the main worksheet. Page 26 of 29

If any of the amounts need to be changed then it should be done in the columns provided for manual override.

27 Corporation Income Analysis The CY and PY amounts (if available) from the Tax Return are used in the Qualifying Income analysis on this worksheet. Verify all the amounts populated from the Tax Return. If any of the amounts need to be changed then it should be done in the columns provided for manual override. Enter the amounts for Line 26 Amortization from the Tax Returns manually in the cells provided to enter the amounts. The Wages amount and the Multiplied by Ownership Percentage fields are also manually input fields. Page 27 of 29

The amount for Line 17 Mortgages or Notes Payable in Less than 1 Year is selected to be recurring if it is available for both years and is

28 Input these amounts directly into the cells provided to enter these fields (shaded in aqua blue) and not in the manual override column. Once the ownership percentage is entered the QI calculation is done depending upon the ownership percentage. The amount for Line 17 Mortgages or Notes Payable in Less than 1 Year is selected to be recurring if it is available for both years and is considered in the QI calculation. You can select this amount to be non-recurring. Upon selecting the amount as non-recurring, it will be grayed out and excluded from QI calculations. Page 28 of 29

29 The total QI analysis is done based on these figures. If there are multiple entities then total from all these fields is represented at the top of the sheet. The amount represented at the top of the sheet flows to the main Worksheet. Page 29 of 29

LoanBeam. Automating Tax Form Processing. National Training Division. Revised 4/6/18

LoanBeam. Automating Tax Form Processing. National Training Division. Revised 4/6/18 LoanBeam Automating Tax Form Processing Revised 4/6/18 Introduction to LoanBeam Topics Covered: How to access LoanBeam in FasTrac360 Uploading tax documents Checking order status Understanding accompanying