A recent Wall Street Journal article reports that the IRS is expanding a program that will mine it's data bases searching for inconsistencies between what a tax payer earns and what the banks report to the IRS as mortgage interest.
Just as employers and others report income to the IRS on 1099 and W2 forms, lenders report the amount of interest that a taxpayer has paid in the preceding tax year, via a IRS Form 1098
The reason for the search is that there are literally tens of thousands of taxpayers that receive a 1098 each year with over $20,000 in interest payments that never file their tax return or reported income insufficient for the taxpayer to cover basic living expenses along with their mortgage.
I was a little shocked to learn that in 2005, the last year with available data, that a combined $1.4 Billion in taxes, penalties and interest had potentially gone unreported.
The article goes on to give examples of what the IRS would be looking for. They suspect that workers in certain industries that are regularly paid in cash will under-report their earnings.
The article was also quick to point out that not everyone who has less taxable income then his or her mortgage interest is a tax cheater. Examples were given of those who have lost jobs but were able to keep their mortgages up with savings or retirement accounts.
THE WSJ ARTICLE MADE ME THINK
Knowing that the IRS is as powerful as it is and has access to so much personal information on every American (and if the presidents health care package passes the IRS will be in the middle of the enforcement of your health benefits, too), it makes me wonder about those who did lie on mortgage applications to get loans they were not able to afford otherwise.
Now, I am not pointing fingers here or judging anyone. We all know that it was common in the "Alt A" loan programs - income was stated and loan officers / mortgage brokers routinely helped borrowers figure out what the magic number was to qualify for their dream home. I covered much on the fallout of this discussion in my recent article, " The Next Wave of Bad Loans - Option Arms".
Once the IRS figures out how much taxes they can collect by looking at the discrepancies - how long will it take them to figure out that they have all of the available information to determine if someone actually did tell a little white lie on his or her mortgage application.
Once a liar has been identified and it is determined that the loan somehow involved federal oversight through some sort of guarantee or purchase by Fannie Mae or Freddie Mac then what will the IRS do with this information? The worst-case scenario that I imagined is that offenders will be arrested and sent to prison. Wouldn't this take care of the presidents' objective to ‘redistribute the wealth in this country'?
OK, admittedly, this may seem far fetched - but just look at it as a very realistic possibility. Heck, this could happen with the laws we have on the books today. Is in not a federal offence and a felony both to lie on mortgage applications? Of course it is. And what is the extreme punishment for violating these sacred documents and lying? Well, there are offenders in prison today for doing just that...so I ask? Is it possible and the answer has to be YES!
Besides, those that are left behind - won't they feel better that all of those cheating people who caused so much turmoil to the economy are having to pay their debt. But wait a minute, if all of those people are locked up, then who is going to pay their taxes and support all of the entitlement programs that our government has continued to develop for decades?
If you don't know whom your congressperson is or how to reach them, check out this link
Blessings to all who read,
John Occhi, REALTOR®
www.JohnOcchi.Com
Hemet - San Jacinto Valley
951-6564-5550
Servicing THE REO Needs of Asset Managers, Servicers, Banks and Lending Institutions in the Hemet - San Jacinto Valley, Temecula, Murrieta, Winchester, Wildomar, Menifee, Sun Valley, Perris, Moreno Valley, Romoland, Homeland, Nuevo, Banning, Beaumont, Cherry Valley, Yucaipa, Redlands, Mentone, Loma Linda and throughout South West Riverside County and The Pass Areas of The Inland Empire in Southern California. If you are a buyer, investor, first time home buyer or are just interested in REO real estate, please contact us at the above phone number.
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