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September 1st, 2009

IRS Will Begin to Closely Monitor Mortgage Payments

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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.

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12 Responses to “IRS Will Begin to Closely Monitor Mortgage Payments”

  1. IRS Will Begin to Closely Monitor Mortgage Payments | HSH … — Mortgage Insurance Says: September 1st, 2009 at 7:50 pm

    [...] [...]

  2. IRS Will Begin to Closely Monitor Mortgage Payments | HSH … | Mortgage company live today Says: September 1st, 2009 at 10:19 pm

    [...] intimately monitors how such income taxpayers inform versus how such they clear on. More here: IRS Will solon to Closely Monitor Mortgage Payments | HSH … Posted in Uncategorized | Tags: but-deteriorating, existing-collateral, fitch, fitch-ratings-, [...]

  3. jonstotts (jonstotts) Says: September 2nd, 2009 at 1:31 am

    IRS Will Begin to Closely Monitor Mortgage Payments | HSH … http://tinyurl.com/lcdjtt

  4. tweeterfinance (tweeterfinance) Says: September 2nd, 2009 at 2:55 am

    Mortgage: IRS Will Begin to Closely Monitor Mortgage Payments | HSH …: The Internal Revenue Service (.. http://tinyurl.com/lcdjtt

  5. mortgagetwitts (mortgagetwitts) Says: September 2nd, 2009 at 4:51 am

    Mortgage: IRS Will Begin to Closely Monitor Mortgage Payments | HSH …: The Internal Revenue Service (.. http://tinyurl.com/lcdjtt

  6. Tammi_LOANZ (Tammi J Koza) Says: September 2nd, 2009 at 4:55 am

    IRS Will Begin to Closely Monitor Mortgage Payments | HSH … http://tinyurl.com/lcdjtt

  7. Harvey, EA Says: September 2nd, 2009 at 7:56 pm

    This is a big topic right now. I think it is important to understand the implications of increased scrutiny on these deductions for taxpayers who are paying a mortgage for a home that they live in, but do not legally own.

    I just wrote an article on my blog about it if you are interested to learn more: http://blog.flamfinancial.com/?p=64

  8. Tim Manni Says: September 4th, 2009 at 11:25 am

    Harvey,

    Thanks for commenting and sharing your blog post. “I think it is important to understand the implications of increased scrutiny on these deductions for taxpayers who are paying a mortgage for a home that they live in, but do not legally own”: is this of particular concern for families members who pay the mortgage, but the deed is in another family member’s name?

    Readers: I encourage you to check out Harvey blog post, for it offers additional info on the subject.

    Hope to hear from you again Harvey, we look forward to reading more of your blog posts,
    Tim

  9. CJM ENT Says: September 4th, 2009 at 8:12 pm

    This is the kind of crap that will help sell more houses and help our country get out of recession!! The IRS and the Oboma lovers just dont get it!! Just another way for Big Brother to have their hands in Americans Lives. The IRS and the Goverment may as well come out and say that Small bussiness owners who own homes are all tax cheats and that the goverment dont want american people to have any wealth any more. The Goverment wants you poor so they can control you!! Hows that hope and change working for you!!

  10. Harvey, EA Says: September 7th, 2009 at 7:04 pm

    Tim,

    Thanks for the kind words! With regard to your question, this may be a concern for family members who pay the mortgage but the deed is in another family member’s name. Much of it depends on who is legally liable for the loan. If the family member is neither on the deed nor the loan but is taking the deduction, they may be a prime target for the IRS. This is because the IRS will not have any record in their database that the taxpayer is liable for a loan.

    I have also seen this happen in reverse at the state level. The Franchise Tax Board in CA accused an elderly woman of hiding income because her name was on a mortgage that was being paid by her children. She still owns the house but now lives in a retirement home, and her children live in her home. From the state’s perspective, how can someone whose only income is from social security be able to afford a mortgage (especially since she is making less income per month than she would be spending on the mortgage)? She didn’t even have to claim the deduction to raise a red flag with the state.

    I hope that answers your question. I enjoy reading this blog and will hopefully be able to contribute the conversation in the future!

  11. Tim Manni Says: September 8th, 2009 at 10:55 am

    CJM,

    Thanks for commenting. So, you don’t think this has anything to do with recouping billions from unreported taxes? Cash businesses have always been a target of interest for the IRS, but now it seems as though they’ve found the best avenue in which to target them — mortgage-interest payments. I just hope the IRS doesn’t begin to falsely accuse any homeowners.

    Thanks for sharing your POV, it’s always appreciated,

    Tim

  12. Tim Manni Says: September 8th, 2009 at 11:08 am

    Harvey,

    Thanks for the prompt and detailed response, our readers and myself appreciate it. We look forward to hearing from you anytime — comments, opinions, and/or venting are always welcome!

    Thanks,
    Tim

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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