According to a new article on Reuters.com, the Federal government could generate up to $1.4 billion in additional tax revenue by comparing mortgage interest statements from banks, with the deductions taken by taxpayers on their returns.
The Internal Revenue Service uses mortgage interest statements, known as 1098 Forms, to catch tax cheats. But a review of 200 samples for 2005 estimated that the agency may be missing tens of thousands of taxpayers who are not reporting or underreporting their income, the Treasury inspector general for tax administration said in a report.
"A large number of individuals are paying a significant amount of mortgage interest and either are not filing tax returns or are filing tax returns indicating their income is not sufficient to cover their mortgage obligations and basic living expenses," said the report, dated August 6.
"The considerable difference between expenditures and income raises very serious questions about whether these taxpayers have additional sources of income that should have been reported on their tax returns," it continued.