End of Year Tips – IRS Form 1098
This is a revision to a blog we wrote in 2016 on this subject. IRS requires detailed information be reported about the property securing a mortgage. The IRS requires information about the address, description, number of properties securing the mortgage, and new for this year the date of acquisition. On the Fiserv Premier system there are several reports to help users analyze the accuracy of their data. Below we will detail a few helpful hints as you consider each of the relevant boxes on the 2019 IRS 1098 form.
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 box 8 will be blank. If not, box 8 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. A collateral address cannot be a PO Box. Do a search for “PO Box” or similar varieties to find and correct these scenarios. In addition, you should compare the address to the collateral description, that also appears on the report, and make sure they are the same. If you have a collateral description that is different than the collateral address, that would indicate an error.
In 2018, the IRS converted this to a dual use field. If the borrowers mailing address does not match the collateral address, it is indicated in Box 8 by defining the actual address of the collateral or a description of the collateral, when there is an absence of a physical address. Fiserv provides two separate reports to assist users in their Box 8 research; one report for address scenarios and one report for description scenarios. Below we will address each scenario.
Box 8 – Address Scenarios.
The nature of this report is to indicate the collateral address does not match the borrowers mailing address. As a result, the addresses should be different in the two columns on the report. If you see addresses that match between the two columns, this indicates that you have duplicate address records. These duplicates should be corrected, and that scenario would then move to the Box 7 report. Also, check for PO Box addresses on collateral and that the address on the collateral matches the description.
Box 8 – Description Scenarios.
The nature of this report is to indicate the collateral does not have a physical 911 address. This may be common on farm ground or new construction. If the property has no address, enter the properties jurisdiction and the properties Assessor Parcel Number (APN). See examples below:
Washtenaw County, MI
Jackson County, MO
Review all descriptions to make sure they adhere to the above requirements.
The nature of this report is to provide feedback on the number of collateral associated with a loan and the number of properties reported as securing the loan. There is the ability to have the system automatically calculate the number of properties securing a loan. We typically do not recommend using this option because the system will simply calculate the number of collateral records and report this number. Often times this will be incorrect because there may be stocks, jewelry, and other such items securing a loan that get counted as properties. Review this report for any loans that have multiple properties to ensure its accuracy. Good loan boarding procedures will ensure this field gets updated properly when a loan is secured by multiple properties. Also be sure to adjust the property count when collateral is released. If this field has a 0 or a 1, it will be interpreted as one property securing the loan. In other words, if the field is blank this will still report to the IRS as one property securing the loan.
This field is a new field for 2019 and is used to report the date of acquisition. If the bank acquired 1098 reportable loans in 2019, you will report the date of acquisition in this field. If the bank did not acquire any new reportable loans, you will not need to worry about this new field.
Other notable considerations:
- In order for loans to appear on the 1098 reports they will need the Interest Reporting Code set to 1098 reportable at the account level.
- During end of year efforts, we recommend running these reports daily in order to see progress on clean-up activity.
- As a side note, it does not appear that mortgage insurance paid will be a deductible item for 2019. At the time of this writing Congress had not extended the applicability of section 163(h)(3)(E) to provide for deductibility of MIP.
Keep in mind new 1098 forms come out well in advance of the end of the year. In fact, the 2020 form is already available, and we have included it below for your records.
For assistance on this and other loan consulting subjects contact us today.