Tax Law (Questions About Taxes)/IRS LETTER

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Question
My daughter received a letter from the IRS stating she claimed mortgage interest that was not reported by the lender so she owes $1800.  My daughter and I bought our home and her name is listed along with mine on the Form 1098 but my SS # is listed as payer of record. Prior to 2011 I always claimed the interest paid because I had the higher income but then I retired and it was to our advantage for her to claim it. We thought either of us could claim the interest paid as long as both didn't do it. Do we need a corrected form 1098 with my daughters SS #?  Should we ask our lender to put my daughter as the payer of record?  How should we respond to the IRS?  We are going to have the same problem with the return she filed for 2012 and my daughter claimed me as a dependent. I did not claim myself. I had to pay about $200. because I closed my 401k. Please help us figure this out. We have never had any problem with a return until now. We have always filed our own returns. No money to pay an expert. Thank you.

Answer
Carol,

Thanks for your question.  I presume the document was a CP-2000 from the IRS.

Initially you need to respond to the letter, explaining the situation.  Don't go into the detail about how you used to claim it, just state something to the effect that she is now making the payments and is, therefore, taking the deduction.  Be certain to state that she is liable on the loan and is on the title.

Going forward, I doubt the bank will make a change.  They generally don't like to.  But you can ask. Failing that, you can issue a Nominee 1098 in her name, indicating that she paid the interest.

Hope this helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA

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I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

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I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

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FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

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The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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