End of Year Form 1098 changes

Form 1098 for 2016
Opportunity to review collateral addresses and descriptions with 2016 changes to the 1098 Forms.

The IRS requires that the address or description of the property securing a mortgage is reported on the 1098 forms for 2016.  Fiserv has released a program that creates reports that can be reviewed and utilized for cleanup of the collateral addresses.  Below are the added boxes on the 1098 form that pertain to the Property Address.

Box 7. If the address of the property securing the mortgage is the same as the payer’s/borrower’s mailing address, the box will be checked and boxes 8 and 9 will be blank. If not, either box 8 or 9 will be completed. There is a misconception that anything that falls under the Box 7 criteria does not need researched. This is false. For instance, if you have addresses on both the loan and collateral that match, but the address is a PO Box – this is incorrect. Do a search for “PO Box” to find and correct theses scenarios.

Box 8. This is the address of the property securing the mortgage. The main thing to look out for with the loans that fall onto the report associated with Box 8 is the scenario where the addresses are the same but they have different address record numbers. These scenarios really should be on the report associated with Box 7. To correct this scenario you’ll want to ensure both the loan and collateral have the same address record number.

Box 9. This is the description of the property securing the mortgage, if box 7 is not checked and box 8 is not completed. For the report associated with Box 9 you should only see loans that have a legal description. This would be a situation where farm ground is securing the loan and there is no real physical address.

The EOY program associated with generating the reports has gone through several revisions. Make sure you have the latest version and make sure you are running the UPDATE option at the appropriate time. The have been some issues with reports showing incorrect data and there is a specific sequence of programs that should be followed to ensure your reports are reflecting the correct data..

We have found that most clients have more clean up than they originally suspect. Some of this is dependent on how much address clean up you have done after 8.0. Another factor is what your procedure is around defining an address properly on each piece of collateral. Keep in mind, if you decide to “wing it” there could be penalties from the IRS if the data is not correct. Make sure you get something in writing from the IRS before you assume your data is fine if you are not following the hard rules associated with Box 7, 8, and 9.

Peak Consulting has worked with multiple clients and found that there are many considerations to keep in mind.  Several of the considerations have resulted in extensive cleanup scenarios.  Please contact Peak Consulting for more information.