Form 1098 & Claiming interest we didn't pay (Short Sale)

Hi,

We completed our short sale last November (With B of A, believe it or not).....we did do 5 months on trial payments last year totalling about $5000. We received a 1098 saying we paid $25,000 in interest last year which of course we didn't. I have been searching all over the web and there is a mixture of answers. Anyone know if we can claim this on our taxes? If B of A sent this same information to the Feds, why wouldn't be able to claim it? A tax friend said they will audit us years laters and ask us to show proof we paid it. Another tax friend said play dumb and claim it. Help please!! Thank you very much...

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Permalink Reply by Shannon M Thomas on February 26, 2011 at 5:40am
I wouldn't claim it.  The fact is you know its not yours.  Just claim what you know you deserve and you will sleep better at nights and its just the right thing to do.
Permalink Reply by Kimberley Kelly on February 27, 2011 at 3:46am
If you didn't pay it, it's not yours.  Temptation would be to claim it, but dump it on your CPA..Taxes are a very dicey slope..
Permalink Reply by Jim Schneider on February 28, 2011 at 4:09am

Jay,

While I'd agree that you don't want to say you've paid if you haven't, you may have and not be aware of it. The bank may have raided the escrow account for unpaid interest, it's an accounting move. I'd send in a qualified written request to their correspondence department, asking for an itemized list of all monies they have received and where they came from. The correspondence address is one the back of your mortgage statements, and you can call B of A and ask for it, if you no longer have this information. Write, "Please consider this a qualified written request, I am asking you to provide me with the following information" and include your postal address.

 

Good luck,

Jim Schneider

Permalink Reply by Steve Early on February 28, 2011 at 3:42pm

Jay:

This is a question you should be asking a CPA or tax professional and I would urge you to seek their advice regarding this.

Permalink Reply by Jay Sullivan on February 28, 2011 at 4:02pm

Thanks for the replies everyone.....We did our taxes on taxact and the 1st time I did it, I put the 1098 info in and it gave us money back. Then I sent it but then we were told we had til the 14th to do any changes, and I went back in and deleted the 1098 info which then showed we owed money. The BIG problem is that taxact sent the original and now we have money in our account (Tax refund). So now, our taxes have been filed and we have been refunded money that may not belong to us......this sucks....

I then am unsure what to put on the 982 form...I check the right box in Part I but have no clue to what to put in Part II. We live in Arizona and are protected both  state and federal wise in terms of having to pay anything. The short sale went through for $85K and we got a 1099 C form for $127K. This is soo confusing.....

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