The IRS plans on further utilizing the mortgage interest information it already receives from banks. The IRS currently utilizes these records to send out notices to persons whom they believe should have filed returns, but have not.
The current mortgage payment data could be utilized to track down individuals who have reported lesser amounts of income than was paid in mortgage interest. This research is anticipated to be utilized on a nationwide basis by the end of 2011. Currently, these types of investigations only take place in some areas of the country and involve only a very small number of cases.
Mortgage interest data can be very helpful in determining tax fraud cases with regard to individuals such as small business owners like roofers or carpenters who tend to be paid in cash for their work and may not properly report all their income to the IRS.
One concerned lawyer voiced that in light of the current tough economic times that individual situations regarding how a household mortgage is paid must be taken into account when a person is being investigated. For example, many households are being forced to cope with unemployment or under-employment situations which require them to borrow, use their savings, or retirement funds to keep their mortgage current.
According to the Treasury Department Inspector, as of 2005, upwards of tens of thousands of households that paid more than twenty thousand dollars in mortgage interest either reported income levels that appear to be insufficient to cover all their household expenses, or did not file a return at all.
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