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Can an IRS disallow Home Mortgage interest deduction?

Burlingame, CA |

A couple of month ago IRS sent me a worksheet to recalculate deduction since I have refinanced my house in Dec 2010 and they had some questions. After filling out the worksheet and applying IRS allowed deduction on the worksheet, it came out that I did not deduct enough and am owed money. I have sent IRS all the documents they requested and they have acknowledged the receipt of those documents. Today I get a letter from the same guy with his adjustment calculations of my tax return completely wiping out the Home Mortgage Interest deduction and telling me I owe $26000 with penalties. Has home mortgage interest deduction been disallowed in 2010 or is that IRS harassment and or incompetence?

My wife got home and looked at the document. She is an EA. It seems that auditor is quite incompetent and does not understand or does not want to understand the documents in front of him (he requested them and got them). Is there a way to request a new auditor on the bases of incompetence? Apperently he demands to see one year worth of payments (during 2010) on the loan that originated in December 2010. He is in posession of re-finance package and closing documents as well as 12 payments on original loan and 1 payment on a new one (closed mid December).

Attorney Answers 3


  1. Best answer

    I agree with the previous answer in that you need to contact a tax attorney. Alternatively a CPA experienced in taxation can assist you. In the meantime, read the communications carefully and make certain you take advantage of your appeal rights.

    Not all mortgage interest in deductible. When you refinanced, how you spent any excess funds may impact on the matter. You should get a consultation with someone to determine . Our firm could assist you as we know these rules inside and out. But, of course, I am sure there are many firms in CA who can assist you. Good luck.

    Marty Davidoff, emd@taxattorneycpa.com, 732-274-1600. This answer is provided for general information only. You should seek advice from an attorney or tax professional.


  2. This is a favorite issue of the IRS. They typically do this by a mail audit. Since most people do not fight it, the IRS makes a lot on this. You need to appeal within the IRS. Please, IMMEDIATELY contact a Tax Attorney to make this appeal for you. Do not delay.

    Ron Cappuccio
    www.TaxEsq.com

    If you do not like this answer or disagree, please look at one of the other answers provided. It is not necessary for you to try prove this answer is "wrong" or something with which you do not agree. This is a free service for you based on limited facts. Nevertheless, many times you need to consult an attorney with the details to get actual advice specific to your concerns. Do not put too many details in your questions or comments because this makes the information public and could hurt you. Government Regulations contained in IRS Circular 230 regulate written communications about Federal tax matters, including e-mail, between us and our clients. This is another attempt by the government to limit your rights and to extend the control of government over individuals and businesses. Nevertheless, such communications are either opinions or other written communications. This is not an opinion. It is other written communication and was not written to be relied upon, by itself, to avoid any tax penalties. In order to receive assurances of protection from tax penalties from a written communication, you should get an opinion letter. If you would like to discuss an opinion letter relating to any matter, please contact me and I will explain what is involved and what it will cost.


  3. Even though he is in New Jersey, you should hire Mr. Davidoff. He gave you a terrific response.

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