I did not file tax returns in 2007 because I was not working. However, I continued to pay my mortgage using savings. Now the IRS wants more information about how I paid my mortgage. What do I tell them?

ANSWER

Expert Michael Lim's Answer:

The IRS is asking you this question because mortgage interest is directly reported to them from your lenders.

Since they know you paid the mortgage, they are assuming that you are underreporting your income (because they assume you must have had income to pay the mortgage).

Since you paid it with savings (which is a perfectly acceptable situation), you should explain this to them in writing.  You should also include a copy of your savings bank statements which show that you had accumulated enough savings to pay your mortgage through this time period, and also would substantiate that you had no income.

Michael Lim, CPA

California

16 yrs experience

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128 Ans.