Yesterday, I received a six page document from the Internal Revenue Service stating that I had claimed too much for my Mortgage Interest Deduction on my 2004 return and I therefore owed the government an additional $1,850 paid within a month.
After doing a bit of sleuthing (thank god I harbor my Dad's gene for filing away documents for situations exactly like this) by reviewing my 2002, 2003 and 2004 tax returns I found that because the 2004 tax return was the first time I calculated my taxes with Turbo Tax and didn't file through my Dad's accountant, I entered my deduction amount on Line 10 of the Schedule A instead of Line 11 and added a statement of explanation at the end.
The issue stems from the fact that the building is owned as a TIC and all the 1098 forms have the name and SSN of one of the other owners, therefore the IRS doesn't automatically apply the portion I paid in mortgage interest to my return. Entering the amount on Line 11 should be done when claiming mortgage interest in the case one doesn't have a 1098. Pretty obvious that I missed that key instruction and that miscue is coming back now.
I went down the the IRS office and consulted with a very helpful agent and was in and out of there in under five minutes. So, I've written a letter explaining my mistake and included a number of supporting documents. I hope this gets resolved quickly.
The silver lining here is that in going over my forms, I may have UNDERREPORTED my actual total mortgage interest because I didn't include the interest I paid on the Line of Credit I had in 2004. So, I actually might get money back from this whole ordeal. Ironic if I actually gain financially from this whole thing.
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