I have a question regarding tax payment on the personal tax returns. When we’re analyzing financials, we typically use line 61 (total tax) to deduct taxes. I’ve heard from analysts from other financial institutions that they use line 72 (total payments) when deducting taxes. I’m trying to understand what the difference would be in terms of cash flow outcome.
Andrew, there are issues with subtracting federal taxes and with subtracting state taxes. Some lenders do neither because they use a debt-to-income ratio that assumes before-tax numbers. But if you need to subtract federal taxes, neither line 61 nor line 72 are perfect, Andrew. Here is my pick…