Internal Revenue Service will scrutinize payment data on real estate loans.

The IRS will be investigating whether it should make more substantial use of data on real estate loan interest payments provided to it by banks through the required reporting process. The program, which searches for inconsistencies between real estate loan payments and income, is currently used to send notices to individuals that do not file tax returns who the IRS believes should have. This program could be used to target individuals, for audit, who report less income than they paid in mortgage interest.

This move by the IRS will expand a regional research project on real estate loan interest to a nationwide level by December 2011. Initiatives such as these typically involve examination of a small number of tax returns to evaluate new enforcement strategies.

According to the Treasury inspector general, tens of thousands of homeowners who paid more than $20,000 in real estate loan interest in 2005, the latest tax data available when the Treasury inspector general’s office began its audit last year, either didn’t file a tax return or reported income that appears insufficient to cover their mortgage interest and basic living expenses.

To read more about this story, IRS to Mine Payment Data

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