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Qualify for a Car Loan without a W-2

Not receiving a W-2 can make qualifying for an auto loan difficult especially for consumers with questionable credit
Qualify for a Car Loan without a W-2
Our experience

If all or part of an applicant’s income doesn’t appear on a W-2 statement, this can adversely affect their auto loan application especially if they have bad credit.

At Auto Credit Express we’re aware of this because we’ve spent over two decades helping car buyers with problem credit looking for online car loans find those new car dealers that can best help them. We know what often happens when employers pay their employees in cash or with a personal or business check when they shouldn’t be doing this.

Consumers that believe they fall into this category should read on because this can often result in a rejection of credit even from high-risk auto lenders.

Income reporting rules

Unlike regular employees that receive a W-2 wage statement at the end of the year, independent contractors don’t have payroll taxes taken out of their checks. Instead they receive a Form 1099 from their employers.

But just because they receive a 1099 doesn’t mean they should be. In fact, the IRS looks at three things to determine whether someone qualifies as an employee or really is an independent contractor:

Behavioral control – if you receive extensive instructions on how, when or where to do the work, what tools or equipment to use, what assistants to hire to help with the work or where to purchase supplies and services, you are usually considered an employee. If not, you could be an independent contractor. Extensive training on how to perform the work also might suggest that you are an employee.

Financial control - If you have a significant investment in your work, if you are not reimbursed for some or all business expenses, or if you can realize a profit or incur a loss, this suggests that you are in business for yourself and that you may be an independent contractor.

Relationship of the parties - If you receive benefits, such as insurance, pension, or paid leave, this is an indication that you may be an employee. If you do not you could be either an employee or an independent contractor. A written contract may show what both you and the business intend. This may be very significant if it is difficult, if not impossible, to determine your status.

Income problems

We’ve come across many situations in which an applicant is paid with a check that doesn’t have any taxes taken out even though that individual is not an independent contractor. In most cases the employer is doing this to avoid paying their portion of employment taxes. In some cases that involve being paid “under the table”, the employer, to avoid IRS scrutiny, doesn’t even give that worker a 1099.

Doing this can help the employer and employee avoid paying taxes on this income. But it can hurt the employee in a couple of ways:

•    Reporting less or no income could affect the employee’s future social security benefits

•    If the employee has poor credit and doesn’t report this income on a tax return it could result in a denial of credit for an auto loan either for too little income or for too high of a debt ration from a subprime lender

What to do

If these guidelines indicate you are an employee but you aren’t being paid as one, you should contact both the Internal Revenue Service and your state’s employment relations board to make them aware of the situation.

If you are an independent contractor it’s equally important that you show all your income on your tax return even if you don’t receive a 1099.

As we see it

If you have credit problems and you’re an employee, be sure your wages get reported on a W-2. If you’re an independent contractor you should insist on being sent a Form 1099 and correctly report your income and expenses. Doing this for either situation will give you your best opportunity for a loan approval.

One more thing: Auto Credit Express matches consumers with car credit problems to new car dealers that can offer them their best chances for approved car loans.

So if you’re ready to reestablish your auto credit, you can begin now by filling out our online car loan application.

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