How to Get a CPA Expense Letter as a 1099 Earner

The Quick Read: A signed statement from your tax preparer tells a bank statement lender what share of your business deposits goes to expenses. The lender can then use your real figure instead of its default assumption when it turns deposits into qualifying income.

• The letter is optional on most programs, and it matters mainly when you use business bank statements.
• Your CPA, enrolled agent, or other licensed preparer writes and signs it, never you.
• It supports the file but does not replace your statements, returns, or profit-and-loss report.
• A rental purchase financed on a DSCR loan does not need one, because that loan looks at the property’s rent.

If you earn 1099 income, you have no pay stubs and no employer to confirm what you make. A bank statement loan solves that by reading your deposits. Deposits are gross money, though, and a lender knows part of that money went to costs. So it applies an expense factor, which is a percentage it subtracts from your deposits before counting the rest as income.

Many lenders start from a default factor. The letter is your chance to replace that default with a documented number. If your real costs are low, the swap can raise your qualifying income. If your real costs are high, the letter can work against you, so you should know your number before you ask for one.

What Is a CPA Expense Letter, and What Is It Not?

A CPA expense letter is a short signed statement. It gives your business expenses as a percentage of gross revenue, for a stated period, based on records the preparer reviewed.

Here is what it is not:

• It is not an income verification letter.
• It is not a profit-and-loss statement.
• It is not an audit.
• It is not a promise that you can afford the loan.

No official form exists. No government agency publishes a template, and each lender sets its own wording. Across the wholesale network Lendmire works with, the core content looks alike. One lender may want an extra sentence that another never asks for. That is why you should get the lender’s exact request before anyone drafts anything.

Why Do 1099 Earners Get Asked for One?

Your income arrives from several payers, it moves from month to month, and it carries no withholding. A lender cannot read a pay stub, so it reads twelve months of deposits instead. On a business bank statement program, it adds up eligible deposits and removes transfers and other non-income items. It averages the rest and applies an expense factor.

That last step is where the letter comes in. Business accounts hold gross receipts and also the money you spend on software, vehicles, subcontractors, and supplies. The default factor is a blunt guess at those costs. Your preparer’s letter replaces the guess with a documented figure.

Personal bank statement programs usually work differently. Most apply no expense factor, or a small fixed one, because personal accounts already hold what you took home. Programs differ here, so ask which structure your file uses.

Do You Actually Need One?

You need one only when your program is built on business statements, the lender allows an override, and your real expense ratio beats the default. In other situations the letter is unnecessary or even harmful. Use this table as a starting point.

Picture a freelance designer who runs deposits through a business account and carries almost no overhead. The default factor takes out far more than the designer actually spends. A letter with a much lower figure raises the income the lender can count, which can raise the loan amount the file supports.

Now picture a contractor who pays crews and buys materials out of the same account. Real costs may sit close to the default, or above it. The letter would not help, and the contractor may do better on a different documentation path.

That is the reason to ask your preparer for an estimate first. Do not order a letter until you know which way the number points.

Who Can Sign It?

A CPA, an enrolled agent, or another licensed tax preparer can sign, depending on the lender’s guidelines. Self-certification does not count, even if you keep your own books carefully. The lender wants a credentialed outside party.

Many lenders also want the preparer to be someone who prepared or filed your return, or at least reviewed it. A stranger who looked at your bank statements for ten minutes carries less weight. If you do your own taxes with software, you will need to hire someone before the letter is possible.

How Does a 1099 Turn Into an Expense Ratio?

Your preparer builds the ratio from your tax records. If you file as a sole proprietor or a single-member LLC, 1099-NEC income is generally reported on Schedule C, and your business expenses offset it there. The IRS treatment scenarios for 1099-NEC and 1099-MISC income walk through this. They also note that a missing 1099 does not remove your duty to report the income.

The preparer then divides total expenses by gross revenue for the same window as your statements. That window is commonly twelve months on the programs in Lendmire’s network. The percentage should line up with your filed return, your profit-and-loss report, and your deposits. If the three disagree, the underwriter will notice.

Not every 1099 earner files on Schedule C. An S-corp or partnership owner reports differently, and the paperwork may center on K-1s and entity returns instead. Mixed W-2 and 1099 income adds another layer. Your preparer can tell you which records apply to you.

What Must the Letter Say?

Lenders want a short, factual letter on letterhead. Wording varies, but the usual elements are these:

The period is the detail that bounces the most letters. If your statements run for twelve months, the letter’s coverage should match them.

How Do You Get One? Step by Step

1. Confirm your program path. Ask the loan officer whether your file uses business statements, personal statements, or a product built on 1099 forms. Only the first usually calls for the letter.

2. Get the lender’s exact wording. Ask for the required elements in writing. Your preparer will sign only what is true and within their scope, so give them the actual request.

3. Gather the inputs. These typically include your tax return with Schedule C and a profit-and-loss report for the statement period. Add business and personal bank statements, entity documents or a business license, and EIN paperwork if you have an entity.

4. Ask for an estimate first. Have the preparer tell you the expected ratio before drafting. If it is worse than the lender’s default, stop and rethink the documentation path.

5. Sign the consent form. A preparer needs your written permission before releasing information to a lender. The Journal of Accountancy explains that the lender is not the CPA’s client, so the client’s consent has to come first. The article is older, but the principle still holds.

6. Send the request and review the draft. Check it against the list above before you forward it.

7. Submit it with the rest of the file. The underwriter checks the credential and compares the percentage to your statements and returns. Then the underwriter either accepts it or adjusts it.

A Request Email You Can Copy

Swap the capitalized placeholders (PREPARER’S NAME, START MONTH, END MONTH, YOUR NAME) for your own details before you send it.

Subject line: Expense ratio letter for my mortgage application.

Hi PREPARER’S NAME,

I am applying for a bank statement mortgage that uses my business deposits. The lender allows an expense ratio letter from my tax preparer in place of its default expense assumption.

Could you tell me first what my actual expense ratio looks like for START MONTH through END MONTH? If it is a reasonable number to certify, I would like a short letter on letterhead with your credential and license number. The lender’s required elements are attached.

I will sign whatever consent form you need. If any sentence in the lender’s request is something you cannot certify, please tell me which one so I can ask the loan officer about alternatives.

Thank you, YOUR NAME

What Can Your Preparer Certify, and What Won’t They?

Preparers can certify facts drawn from records they reviewed. They generally will not certify forecasts, your ability to repay, or anything resembling an opinion about the loan. Letters that stay on historical facts and say they rely on client-supplied information are the safest for them to sign.

This is not stubbornness. A preparer who signs a broad statement can face real liability if the borrower later defaults and the lender blames the letter. The Journal of Accountancy piece notes that an attestation engagement is possible for a lender’s request, so assurance-type work is not forbidden. It simply costs the preparer more effort and more risk, which is why many decline.

Lenders have a reason for wanting this paper trail. The CFPB’s ability-to-repay compliance guide says a creditor must use reasonably reliable third-party records to verify the income and assets it relies on. A CFS Review analysis explains that non-QM lenders must still consider income or assets, using records specific to the individual consumer. Non-QM does not mean no documentation. It means different documentation.

One more point on disclosure. A bank statement loan on your primary home or second home is a consumer mortgage, so consumer disclosure rules like TRID apply. A bank statement loan on a non-owner-occupied rental, including a short-term rental, is business-purpose and exempt from TRID. Know which one your property falls under before you compare offers.

What If Your Accountant Says No?

Start by asking which sentence is the problem. Often it is one phrase, such as wording that sounds like a guarantee or a statement about future income.

Then ask your loan officer whether narrower factual wording will satisfy the lender. Do not edit the letter yourself and send it back as your preparer’s work. An altered letter damages the file and exposes the preparer.

If the preparer has never written one, offer the lender’s required elements and the sample skeleton below. A first-time request goes smoother when the preparer can see exactly what is being asked. If they still decline, look for a different licensed preparer who works with self-employed clients. Expect them to want to review your records before agreeing.

Pressure is the wrong answer. Hunting for a more cooperative signer who will certify a number the records do not support puts you, the preparer, and the file at risk.

A Pre-Submission Checklist

Before you forward the letter, confirm each of these:

• The coverage period matches your bank statement window.
• The license number, credential, and firm details are on letterhead.
• The letter is signed and dated.
• The borrower and business names match your statements exactly.
• The ratio agrees with your filed return and profit-and-loss report.
• The scope statement says the work is not an audit or review.
• No sentence promises future income or affordability.

If the letter sits well outside what your returns show, expect questions. Underwriters can reject a figure that looks inconsistent with the filed numbers.

A Sample Letter Skeleton

Use this only as a starting point for your preparer to adapt. Every capitalized item is a placeholder for a real detail.

FIRM LETTERHEAD

To whom it may concern:

I, PREPARER’S NAME, CREDENTIAL AND LICENSE NUMBER, have prepared or reviewed the tax filings of BORROWER’S NAME, owner of BUSINESS NAME with OWNERSHIP PERCENTAGE ownership, and have known the business for LENGTH OF TIME.

Based on the tax return, profit-and-loss report, and bank statements provided by the client for START DATE through END DATE, business expenses were approximately PERCENTAGE of gross revenue for that period.

This statement is based on information supplied by the client. It is not an audit or review.

Signature, date and contact details of the preparer appear below.

Where the General Rule Breaks

These are the main edge cases where the usual advice does not apply.

• DSCR loans. A DSCR loan on an investment property qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. A borrower’s 1099 income is generally not part of the analysis, so no expense letter is needed. This is the cleanest route if you are buying a pure rental. The complete DSCR loans guide explains how that qualification works.
• Personal statement files. The letter usually does nothing, because the expense factor is small or absent.
• Programs built on 1099 forms. Some products use your 1099 forms instead of deposits and may require a full calendar year of forms. Whether an expense factor applies depends on the program sheet.
• Recent W-2 to 1099 switchers. These borrowers often fall under a separate guideline with its own history requirement.
• S-corp and partnership owners. Schedule C may not be the source document, so the preparer works from different returns.
• Declining income. A lower recent year can complicate the ratio and the averaging, so talk through it with your loan officer before you submit.

What the Decision Looks Like in Practice

Start with the property. If you are buying a rental to hold as an investment, check whether a DSCR loan fits, since it sidesteps the personal income question.

If you are buying or refinancing your own home on bank statements, the leverage depends on the transaction. Across select lenders in Lendmire’s network, a primary residence purchase or rate-term refinance can reach up to 90% LTV, with stronger files earning the top of that range. On an owner-occupied cash-out, the ceiling is lower: up to 80% LTV with a fixed expense ratio, and 75% LTV when the file uses an accountant-prepared ratio. Investment-property cash-out tops out around 75% LTV. Investment purchase leverage on bank statements varies by lender.

Loan sizes generally run from $125,000 to $3,500,000, and reserves are commonly around six months of the housing payment. Credit and loan size shift the limits, and all of it is subject to lender guidelines.

Your expense ratio drives how much income the lender can count, which in turn affects how much you can borrow. For a deeper look at that choice, read Lendmire’s comparison of an expense factor and a CPA letter on a bank statement loan.

The consumer side of this lane is arranged through select lenders in the wholesale network, and consumer availability covers 16 states.

This article is not legal or tax advice. Tax treatment varies by situation; consult a qualified professional, such as an attorney or CPA, about your own circumstances before you rely on any letter or loan structure.

Key Terms Defined

Expense factor: The percentage a lender subtracts from your deposits before counting the rest as qualifying income.

Bank statement loan: A mortgage that is reviewed on documented income under the applicable program, subject to lender guidelines, using deposit averages from 12 months of statements.

Schedule C: The tax form where a sole proprietor or single-member LLC reports business income and expenses.

1099-NEC: A form a client sends to report payments made to you as a contractor instead of an employee.

Attestation engagement: A formal assurance service where a CPA examines specific information and reports on it, which is more involved than a simple factual letter.

LTV: The loan amount as a percentage of the property’s value.

For current guidelines and terms, see Lendmire’s self-employed mortgage programs page.

About Lendmire

Lendmire is a DSCR-focused mortgage brokerage, NMLS# 2371349, placing investor loans across 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed by the lender around a property’s rental income rather than personal income documentation, which fits LLC-held rentals, self-employed investors, and portfolios scaling past conventional financed-property limits. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. IRS: Form 1099-NEC and 1099-MISC income treatment scenarios

2. Journal of Accountancy: Concerns About CPA Letters to Third Parties

3. CFPB Ability-to-Repay and Qualified Mortgage Small Entity Compliance Guide

4. CFS Review: CFPB addresses non-QMs under the Ability-to-Repay rule