Got a Mortgage? Make Sure You File

September 17, 2009

             Recent word from the Treasury Department provides just a little encouragement to folks with big mortgages to file income tax returns, for starters, and to make sure that they make sense. Big mortgage implies big income, and that better be evident on the return!
            A recent report by the Treasury Inspector General for Tax Administration (TIGTA) recommends that the IRS ought to be using mortgage interest data reported to it by lenders (on Form 1098 annually) to detect nonfilers, and folks who have maybe understated their income by more than just a little.
            Seems that TIGTA has evaluated stat samples of folks who received Form(s) 1098 reporting $20,000 or more of mortgage interest paid in tax year 2005. In so evaluating, TIGTA discovered that some 220,000 individuals seemingly did not file tax returns at all! And from this population, TIGTA randomly chose 100 for review and determined that 21 appeared to have a filing requirement, but yet had not even been contacted by IRS!!!
            To determine the amount of taxes which these 21 apparent scofflaws might owe, TIGTA used one of IRS’ secret analytical tools to estimate that they may owe as much as about $178,000 in delinquent taxes and about $107,000 in penalties and interest!!!
            And if that’s not enough from the sampling process, TIGTA also identified about 245,000 folks who reported less adjusted gross income on their 2005 returns than the amount of the mortgage interest shown on their returns! And from a random selection of 100 of these 245,000, TIGTA noted 37 individuals who may have underreported their income because their mortgage interest and overall living expenses were apparently in excess of their income!
            So, in the face of all of this, the Internal Revenue Service has propounded that it will expand its extant “initiative” to look into the matter further.
            And for all of you savers, out there, take heart in the notion that Obama does actually profess to favor enhanced savings for retirement! Three recent (IRS) revenue rulings, four (IRS) notices and new IRS website commentary does propose to make it easier for employers to provide for automatic retirement plan enrollments and automatic contribution increases for all of you worker bees. The Administration has also suggested to Congress that it adopt proposals calling for automatic IRAs in cases where employers don’t offer retirement plans, along with matched retirement savings for lower income workers.
            Isn’t it about time?
CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters. You should consult your CPA regarding the implications to your own particular situation.
            Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno. He can be reached at
831-7288, and welcomes comments below.

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