Tax Tips For Mortgage Holder

As we approach the end of the year, there are actually quite a few tax filing deadlines in January that affect many people that hold mortgage notes. Even though the tax deadline is April 15th, dont be caught unaware of filings required for Form 1098.

This is a very basic primer of information you need to know about Form 1098 - Mortgage Interest Statement. This information may assist the holder of a mortgage note in identifying potential filing requirements.

You can get the general instructions from the IRS website at http://www.irs.gov or
by calling 1-800-TAX-FORM (1-800-829-3676). Review and follow these IRS instructions as they provide the authoritative guide in submitting your Form 1098 filing.


Form 1098 - Mortgage Interest Statement

Federal law requires that you use Form 1098, Mortgage Interest Statement, to report mortgage interest of $600 or more received by you during the year in the course of your trade or business from an individual, including a sole proprietor.

The $600 threshold applies separately to each mortgage; thus, file a separate Form 1098 for each mortgage. You may, at your option, file Form 1098 to report mortgage interest of less than $600.


Filing Deadlines

The appropriate form is prepared for each reportable party and sent to the IRS with a duplicate form sent to the individual payee. In addition, prepare and file a Form 1096 summarizing all the information filed on Form 1098. Each of these forms are due to the IRS by February 28 of each year for the prior calendar year. A copy of Form 1098 must also be sent to the recipient of the payment by January 31.


Penalties

Be aware that there are stiff IRS penalties for not filing Form 1098. There can be a penalty for failure to obtain an appropriate tax identification number and/or filing late. There is also a penalty for not filing or not giving a Form 1098 to a payee, as well as for not filing a copy with the IRS.
In general, if you cannot determine whether you are or are not receiving mortgage interest incident to a trade or business, it is best to obtain competent professional tax advice.


Exemptions

You may not be required to file this form if the interest is not received in the course of your trade or business. For example, you hold the mortgage on your former personal residence and receive mortgage payments from the buyer.

For example, a mortgage holder not engaged in any other business, lent money to an individual to buy the mortgage holders personal home. That mortgage holder may not be subject to this reporting requirement because they did not receive the interest in the course of their trade or business. Review individual specific situations with a competent tax professional.

If you utilize the services of a collection agent or servicing company to collect interest payments, chances are that the collection agency or servicing company will file Form 1098. Double check that this is being properly handled.

Summary

This general basic overview is presented with the understanding that the author is not engaged in rendering legal, accounting, taxation or other professional services. If legal or other expert assistance is needed, the services of a competent professional person should be secured.

Free tax publications and forms can be obtained by contacting the IRS at 800-829-3676 or better yet, download the information and forms from the IRS website at http://www.irs.gov