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In order to qualify for a first time home buyer refinance in NJ I need a household income of under 102k.

My wife filed as a schedule C for a babysitting group in 2020 17k and 2021 5k. (She stopped after having our baby)

The bank wants to add her 2 years of income together as 11k yearly income which pushes me over the 102k limit.

The bank said they wont add my wife's income to our household income total if I have proof from the state that a final return was filed & proof business no longer active/closed.

The problem is that since it was a schedule c business no formal action has been taken to close the business as described in this link

There is no need to send dissolution paperwork to the IRS. The IRS will automatically consider your business dissolved if you do not submit another "Schedule C" for your business.

Is there a different way to prove that her business is no longer active?

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  • Consider talking to a bank that actually trusts you and doesn't treat you as a liar
    – Hilmar
    Commented Oct 25, 2022 at 18:19
  • Not too far out from filing 2022 return which should be sufficient, if you can't find a lender that will work with you might just have to wait it out a few months.
    – Hart CO
    Commented Oct 26, 2022 at 13:10

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Is there a different way to prove that her business is no longer active?

Not to the government. The bank should tell you what alternative paperwork they can accept.

You'll need to explain to the bank that while what they ask for exists for partnerships or corporations, it doesn't exist for sole proprietorships. Suggest alternatives like:

  • Notarized sworn affidavit
  • CPA declaration that your business is no longer active (you'll need to have a CPA familiar with your financials who'd be willing to sign that)
  • Whatever else that may make them happy

It is generally hard to prove a negative, and the bank wants to cover its a$$ets. It's a tough situation to be in, and unfortunately you can only provide a proof that your bank would agree to accept.

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