IRS Will Begin to Closely Monitor Mortgage Paymentsby Tim Manni
The Internal Revenue Service (IRS) has announced plans to expand a program that closely monitors how much income taxpayers report versus how much they pay on their mortgage. The IRS expects the expansion to take place by 2011:
After prompting from an IRS auditor, the agency will study whether it should make greater use of data on mortgage-interest payments provided to it by banks. The IRS currently uses such data to send notices to non-filers who it believes should have filed a return.
The data could also be used to target for audits individuals who don’t file tax returns, or who report less income than they paid in mortgage interest, according to a letter released Monday by the Treasury inspector general for tax administration.
Some experts believe that examining mortgage-interest payments may be the best way to monitor small business owners who operate mostly cash businesses.
Others, however, feel that the current economic environment could wrongly target so-called fraudsters. Since widespread job losses have caused many Americans to use their savings accounts to pay their mortgages. These homeowners may appear to be tax cheats even if they are not:
“We shouldn’t presume that these struggling families are tax cheats just because they continue to make their mortgage payments despite losing their income,” said Rep. Charles Boustany (R., La.), the ranking minority member on the House Oversight Subcommittee.
The Treasury believes that there are enough violators who paid over $20,000 in mortgage interest but never even filed a tax return to take a closer look into the matter:
Based on a sample of these returns, nonfilers and potential under-reporters identified by the inspector general could have owed a combined total of $1.4 billion in tax, penalties and interest, the auditor said.
The U.S.’s rampant deficits have lit a fire under Federal officials to collect more income where ever possible. Just as we wrote yesterday, the recession has caused almost every industry, company, and Federal institution to adjust their behavior in order to pull in additional revenue.