Different Data Won’t Alarm IRS

QUESTION: I just got the year-end notification from my bank spelling out how much interest I paid on my mortgage last year. Despite their assurances that I could prepay some interest on the loan and not run into any bookkeeping nightmares as a result, there is no record of the prepaid interest on the bank statement. If I take as a tax write-off the interest expenses I really had instead of those the bank said I had, am I subjecting myself to an Internal Revenue Service audit?--C. P.

ANSWER: Probably not. Banks and other financial institutions that collect interest on mortgages are required to provide an annual accounting of all interest payments they receive--both to the government and to the person who made the interest payments.

But this is a rather new reporting rule. And it has taken many financial institutions much longer to comply with the new rules than the government anticipated.

In their rush to comply, some institutions set up their computers to report only what the IRS requires them to report--that is, interest payments actually due during the year. Not included in that figure are such things as prepaid interest and what are known as points--an amount a borrower pays up front to get a loan. Both are deductible on your tax return.

This may be the cause of your apparent loan discrepancy.

The reason this shouldn’t cause you any further problems is that the IRS is fully aware of the troubles that its new reporting rules have caused and has excused financial institutions from meeting those requirements for 1985.

It follows, therefore, that the IRS will not be alarmed when it starts spotting two different interest-expense figures for the same loan--one from the financial institution and a considerably higher one from the borrower.

Q: I have heard some talk about the IRS letting taxpayers file their federal tax returns whenever they want, as long as they file at least once a year. Can that possibly be true?--H. A. H.

A: You’re not terribly far off base. Rep. George W. Gekas (R.-Pa.) has introduced a bill in the House that would stagger the filing of tax returns and break up the logjam in IRS offices every April 15.

Gekas proposes that taxpayers file their returns according to their dates of birth. Taxpayers born between Jan. 1 and April 30 would continue to file by April 15. Everyone else would be required to file no later than the end of their month of birth.

But don’t get your hopes up. The bill was only recently introduced and must endure the long legislative process.