What Is IRS Form 1088, the Settlement Offer Form?

IRS Form 1088 is not a document issued by the Internal Revenue Service (IRS) for the purpose of proposing a settlement offer for tax disputes. Instead, the form commonly identified as Form 1088 is the Fannie Mae Comparative Income Analysis, a tool utilized by lenders. Its primary function is to assess the financial viability and historical performance of a self-employed borrower’s business. This analysis aids lenders in making informed decisions regarding mortgage loan applications.

Understanding Form 1088’s Role

Fannie Mae Form 1088 serves a specific role within the lending industry. Lenders use this form to conduct a detailed comparative analysis of a self-employed borrower’s business income, expenses, and taxable income over several years. This multi-year comparison helps identify trends in the business’s financial health, providing insights into its stability and capacity to generate consistent income for loan repayment.

The form requires data inputs such as gross receipts or sales, returns and allowances, cost of goods sold, and total deductions. These figures are extracted from various IRS tax forms, including Schedule C (Form 1040) for sole proprietorships, Form 1065 for partnerships, and Forms 1120 or 1120-S for corporations. By meticulously calculating percentage changes in these financial metrics, the form presents a clear picture of the business’s growth or decline over the period under review.

This analytical approach allows lenders to evaluate the overall viability of the business, an important step in the underwriting process for self-employed individuals seeking mortgages. It ensures the borrower’s income stream is reliable enough to support the proposed loan. Emphasis on year-to-year trends mitigates risks from fluctuating business performance.

Key Information on Form 1088

Fannie Mae Form 1088 contains sections designed to capture and analyze business financial data. Key information presented on this form includes the borrower’s name and the company’s name. It then details the gross income, calculated as gross receipts or sales minus returns and allowances, for each year under review.

The form also outlines expenses, derived from the cost of goods sold plus total deductions, for the same periods. Taxable income figures are drawn from relevant IRS tax returns, such as Form 1040 Schedule C, Form 1065, or Form 1120/1120-S, providing a standardized basis for comparison. For each of these financial categories, the form guides the lender in calculating the percentage change from one year to the next.

The form also includes calculations to determine expenses and taxable income as a percentage of gross income for each period. This assesses the business’s efficiency and profitability ratios. The structured layout of Form 1088 ensures consistent evaluation, enabling lenders to make informed decisions regarding the borrower’s business viability.

Taxpayer Actions After Receiving Form 1088

Self-employed individuals applying for a mortgage loan may be asked to provide financial documentation for Fannie Mae Form 1088. This typically involves furnishing copies of federal income tax returns and supporting schedules for at least a two-year period. The lender requires these documents to accurately complete the comparative income analysis.

The taxpayer’s primary action is to ensure all requested tax returns and financial statements are accurate and complete. This allows the lender to properly assess the business’s gross income, expenses, and taxable income trends. Providing precise and organized documentation can facilitate a smoother and more efficient loan application process.

While the taxpayer does not fill out Form 1088 themselves, their cooperation in providing timely and accurate financial records is important. This information directly impacts the lender’s ability to complete the analysis and evaluate the stability of self-employment income. Consulting with a tax professional or financial advisor before submitting these documents helps ensure accuracy and proper presentation.

IRS Processing of a Form 1088 Response

The Internal Revenue Service (IRS) does not process responses to Fannie Mae Form 1088, as it is a document used by mortgage lenders. The IRS has its own distinct processes and forms for resolving tax-related matters. When taxpayers need to address tax disputes or settle outstanding liabilities, they engage with specific IRS programs.

For instance, if a taxpayer qualifies for an Offer in Compromise (OIC), they would submit Form 656, Offer in Compromise, to the IRS. This form outlines their proposal to settle a tax debt for a lesser amount. The IRS then reviews the taxpayer’s financial situation, including their ability to pay, income, expenses, and asset equity, to determine if the offer is acceptable.

The Fast Track Settlement (FTS) program helps resolve unagreed examination issues. A mediator from the IRS Office of Appeals works with the taxpayer and examination team to reach a resolution, often within 60 days. IRS processing for these programs involves evaluating submitted information and negotiating a resolution based on established tax laws and policies.