The IRS has accepted a request by ABA to consider whether and how to report — on IRS Form 1098, Mortgage Interest Statement — any accrued but unpaid interest that is added to the principal of modified mortgages. As ABA asked for, the issue will be considered through the IRS Industry Issue Resolution program, which offers industry and others an opportunity to submit frequently disputed or burdensome business tax issues for possible resolution through published or administrative guidance.
ABA will work with the IRS and other industry participants over the next several months to address ambiguity in the tax rules about whether, when and how the accrued interest should be reported. The goal is for guidance to be prospective in nature, allowing sufficient time for any technology and system changes to be made and consideration to be given to borrowers who may need to be make changes in interest deduction taken on past returns. For more information, contact ABA’s John Kinsella.