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IRS Form 1098

What is IRS Form 1098?

IRS Form 1098

IRS Form 1098, Mortgage Interest Statement, is used by a lender to report mortgage interest and points of $600 or more. Mortgage interest is the amount of interest payments that the borrower pays in a year on a loan secured by real property. Real property is land and generally anything built on it, growing on it, or attached to the land. Real property includes certain manufactured loans. Points refer to certain points paid by the borrower at the time of purchase of a primary residence.

The lender furnishes Form 1098 to the borrower and the IRS. It prepares three copies of Form 1098: Form A, Form B, and Form C. Form A is provided to the IRS, Form B is provided to the borrower, and Form C is retained by the lender for its records. The form is generally issued by the Servicing department of the lender. Alternatively, the lender may have a separate regulatory reporting or IRS reporting group within its Servicing department.

Source :www.MortgagesAnalyzed.com

Payer of Record, Multiple Borrowers, and Payments by a Third Party

Payer of Record is the borrower that the lender designates as principal borrower in its records. In case of a single borrower on a loan, the sole borrower is the Payer or Record. In case of multiple borrowers on the loan, the lender will select one of the borrowers as principal borrower. IRS allows the Form 1098 to be issued only to the principal borrower, provided the principal borrower is an individual. An individual includes sole proprietorship, but does not include a corporation, partnership, trust, estate, association, or company (other than a sole proprietor)

If the payments are made by a third party, then the Form 1098 is issued to the borrower showing the total payments as if the payments were made by the borrower. For example, if the borrower's mother makes interest payments on behalf of the borrower then the Form 1098 would be issued to the borrower showing the total payments. The mother will not receive any Form 1098.

Seller Payments are not reported on Form 1098.

Below is a table that presents the requirement to issue a Form 1098 under different circumstances.

Source :www.MortgagesAnalyzed.com

Who Must File Form 1098

Any person who is engaged in a trade or business and in the course of such trade or business receives mortgage interest of $600 or more from an individual. The trade or business need not be mortgage lending. Therefore, not only mortgage lenders but any entity who receives mortgage interest, such as real estate developers, Servicers, or certain collection agents.

Source :www.MortgagesAnalyzed.com
Case No Number of Borrowers Payer of Record Is 1098 Issued
Case 1 Single Borrower Individual Yes
Case 2 Single Borrower Non - Individual No
Case 3 Multiple Borrowers Individual Yes
Case 4 Multiple Borrowers Non - Individual No
Source :www.MortgagesAnalyzed.com

When is a Form 1098 Filed?

  1. Mortgage Interest: Form 1098 is required if the recipient has received mortgage interest and points of $600 or more from an individual.
  2. Points: Points paid for the purchase of the payer of record's principal residence are reported on Form 1098 if the points and other interest on the mortgage are $600 or more. For example, if points are $200 and mortgage interest is $400, then a Form 1098 is filed. For points to be included in the Form 1098, they must be calculated as percentage of loan amount and identified in the Settlement Statement (HUD-1) as "loan origination fee", "loan discount", "discount points", or "points". Points must relate to purchase of the payer of record’s principal residence. Points paid on a vacation home, investment home, or second home are not reported in Form 1098. For complete details on reportable points, including points on a construction loan, see the IRS Instructions for Form 1098.
  3. Repayment of Overpaid Interest: Form 1098 is required to be filed if the amount of overpaid interest that was repaid to the payer of record is $600 or more. If the lender is required to furnish a Form 1098 because the lender received at least $600 in interest then the lender must include in the Form 1098 the amount repayment of overpaid interest even if it the repayment was less than $600. The repayment is reported on Form 1098 for the year in which the reimbursement is made. Amendments to prior year Form 1098 are not made. Also, the lender would report the total repayment even if the repayment is for overpayments made in more than one year. To be reportable, the repayment must be a refund or credit of mortgage interest received in a prior year that was required to be reported for that prior year by any interest recipient on Form 1098.
  4. Borrower’s Ability to Claim Deduction: Form 1098 is filed regardless of whether the borrower/payor can claim a deduction for mortgage interest.
  5. Loan Classification: The Form 1098 is issued for any mortgage loan as long as the obligation is secured by real property. Therefore, it is immaterial whether the loan is classified as first lien or subordinate lien, residential or commercial, or otherwise. It includes mortgage that is in the form of a line of credit or credit card obligation.
  6. Non-resident Alien: For non-resident alien, a Form 1098 is filed only if all or part of the security for the mortgage is real property located in the United States.
Source :www.MortgagesAnalyzed.com

Due Dates for Filing Form 1098

Form 1098 is filed in the year following the year in which the mortgage interest or points were received. The due dates are:

  1. Copy A of the Form 1098 must be filed with the IRS by February 28. If filing electronically then the due date is April 1.
  2. Copy B of the Form 1098 must be provided to the payer of record by January 31.
Source :www.MortgagesAnalyzed.com

Contents of Form 1098

Form 1098 contains the information listed below. Note that the form will contain information about the person who paid the interest (payer of record) whether it is the borrower, a co-borrower, or another person.

  1. RECIPIENT’S/LENDER’S name, address, and telephone number: This is usually the original lender or the servicer’s contact information.
  2. RECIPIENT’S federal identification number: Tax Identification Number (TIN) of the lender or servicer that received the mortgage interest.
  3. PAYER’S social security number: Borrower's/Payer's Social Security Number (SSN). The SSN may be truncated to the last four digits.
  4. PAYER’S/BORROWER’S name: The borrower's/Payer's name. For co-borrowers that are spouses and staying at the same residence, then it would both the borrower's name.
  5. Street address (including apt. no.): Street address of the borrower/payer.
  6. City, state, and ZIP code: Address information of the borrower/payer.
  7. Account Number: Account number is required if the lender has multiple accounts for the borrower/payer and for whom the lender is filing more than one Form 1098.
  8. Box 1. Mortgage interest received from payer(s)/borrower(s): The total interest received during the calendar year. The interest may be on a mortgage, a home equity loan, or a line of credit or credit card loan secured by real property. Interest includes prepayment penalties and late charges unless the late charges are for a specific mortgage service. Interest does not include government subsidy payments, seller payments, or certain prepaid interest.
  9. Box 2. Points paid on purchase of principal residence: Points paid on the purchase of the payer of record's principal residence.
  10. Box 3. Refund of overpaid interest: Total refund or credit of a prior year(s) overpayment of interest.
  11. Box 4. Blank Box: This is an empty box where the IRS allows the lender to enter any other information that would be reported to the payer, such as the address of the property that secures the debt, real estate taxes, or insurance amount. Information contained in Box 4 is not required to be reported to IRS.
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Borrower's Consideration

IRS allows deducting certain mortgage interest and points from the income of an individual tax payer. Form 1098 provides the information related to the points and interest to the borrower and the IRS.

Record Retention

You should retain the Form 1098 for at least 3 years from the date when the return is due. Longer time periods may apply under specific circumstances such as when you do not file a return or file a fraudulent return. IRS Publication 17 provides general record retention guidelines. You should contact your tax preparer for guidance for your specific circumstances.

State laws may also require a longer retention periods.

Source :www.MortgagesAnalyzed.com
 

Document Summary

 
IRS Form 1098
Purpose
  • IRS Form 1098 is used by a lender to report mortgage interest and points of $600 or more
  • The borrower uses this form to deduct certain mortgage interest and points from the income of an individual tax payer
Use in Mortgages
Form 1098 provides the information related to the points and interest to the borrower and the IRS.
Other Names
  • IRS Form 1098
  • Mortgage Interest Statement
  • IRS Mortgage Interest Statement
Type
Form
Provided By
Servicer
Provided To
Borrower and IRS
Notarization Required
No
Signed By
None
Life Cycle Stage
Servicing
Recordkeeping
The borrower should retain the Form 1098 for at least 3 years from the date the return is filed. Longer time periods may apply under State laws or other circumstances.
Model Form
IRS Form 1098
Applicable Laws
Internal Revenue Code
Source :www.MortgagesAnalyzed.com

Future Updates by IRS

IRS Form 1098 webpage provides filing instructions, recent developments, and information about any future updates or developments affecting Form 1098.

Updated: Aug 29, 2013

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IRS Form 1098, Mortgage Interest Statement, is used by a lender to report mortgage interest and points of $600 or more
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