IRS has two reason to increase compliance measures for mortgage interest claimed as an itemized deduction:

1. Studies have shown that more mortgage interest is being reported by institions then some taxpayers declare as income - giving rise to the question, "How do these taxpayers pay the mortgage?"  It becomes suspect that some taxpayers may not be declaring all their income.
   Treasury Inspector General for Tax Administration - TIGTA - projected that 46,000 non-filers could collectively owe $625 million in additional taxes, penalties and interest for tax year 2005, while the bill could reach $801 million for about 91,000 taxpayers who underreported their income in that year.
2. All mortgage interest is not equal!  Their are several limitations on the deductiblitity of mortgage interest as an itemized deduction, and it is becoming apparent that many taxpayers are not taking the somewhat cumbersome laws into account.  Just because you receive a Form 1098 reflecting the amount of mortgage interest paid, this does NOT mean all that interest is deductible.  This has become more of an issue as many Americans refinanced their homes in the last 10 years, without consideration of the tax laws.

Bottom line... The Internal Revenue Service will expand a compliance initiative program on the mortgage interest deduction nationwide following an investigation by the Treasury Inspector General for Tax Administration, TIGTA said in a recent report.

Readers may recall that the GAO on August 31,2009, recommended the IRS adopt a number of recommendations targeting home mortgage interest deduction noncompliance, including revising its main taxpayer compliance study—the National Research Program—to increase detection of debt-limit noncompliance.  Accordingly, taxpayers and tax return preparers should expect a greater audit emphasis in this area from the IRS.

Now is the time to review this topic to determine if you are in complaince with your mortgage interest deductions!  Feel free to call the office so that we can review your specific  situation.  For more details, the IRS publication can be reviewed by clicking HERE