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Lev
Lev, Tax Advisor
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I took a deduction for a mortgage I am paying but my name is

Resolved Question:

I took a deduction for a mortgage I am paying but my name is XXXXX XXXXX the tax form. The person who gets the form did not take the deduction. The IRS picked up that there was not a form for this and want me to pay them 1300.00. Can I take the deduction if I can prove that I am paying the mortgage?
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

Lev :

Hi and welcome to our site!
We need to understand why the IRS issued the letter - because you deducted mortgage interest - and there is no mortgage interest reported under your SSN. The IRS always performs cross reference verification - and issues letters.
You can deduct home mortgage interest if all the following conditions are met.
--You file Form 1040 and itemize deductions on Schedule A (Form 1040).
--The mortgage is a secured debt on a qualified home in which you have an ownership interest.

Customer:

I do not have ownership in the property except for the fact that I have been paying the mortgage on it for several years. If I don't have the interest under my SSN and my name is XXXXX XXXXX the mortgage do I owe them the money?

Lev :

A secured debt is one in which you sign an instrument (such as a mortgage, deed of trust, or land contract) that:
--Makes your ownership in a qualified home security for payment of the debt,
--Provides, in case of default, that your home could satisfy the debt, and
--Is recorded or is otherwise perfected under any state or local law that applies.
In other words, your mortgage is a secured debt if you put your home up as collateral to protect the interests of the lender. If you cannot pay the debt, your home can then serve as payment to the lender to satisfy (pay) the debt. In this publication, mortgage will refer to secured debt.
So - when you reply to the IRS - you need to attach supporting documents that you made mortgage payments and that you own the property for which mortgage is paid.

Customer:

I don't own the property so do I owe them the money

Lev :

If you do not own the property - mortgage interest may not be deducted. Such deduction is only allowed to owners.

Customer:

Thanks!

Lev :

Sorry if you expected differently.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22849
Experience: Taxes, Immigration, Labor Relations
Lev and 8 other Tax Specialists are ready to help you
Expert:  Lev replied 1 year ago.
In this case - you may agree with the IRS proposed assessment and ask them to abate penalty as that was a honest mistake.
You still will owe back taxes and interest.

The best path forward might be to ask the IRS to abate penalties, however it would be very unlikely that interest charges are abated. File a form 843 -http://www.irs.gov/pub/irs-pdf/f843.pdf
to request the "accuracy related penalty" be abate based on reasonable cause. If you provide the reason like "I forgot" - I do not think it will be considered as reasonable - so be careful when prepare an abatement request. If you have a health reasons - most likely it would be accepted.
Here are instructions - http://www.irs.gov/pub/irs-pdf/i843.pdf
If the IRS accepts your reasons as reasonable - and agrees to abate penalties - at least part of the issue would be resolved.

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