IRS audit flag questions ?
Q.I have a question on how I will divide up the mortgage interest deduction for the tax year that I moved out of my house for a pending divorce. If I lived in the house for 3 months of 2004, on my 2004 taxes could I legally take 3/12 of the mortgage interest deduction? This detail is not spelled out in the settlement and the settlement has already been signed. If she takes 100% of the mortgage interest deduction (she won't agree to a partial deduction) and I take 3/12, what will happen? Will that put up an IRS audit flag? How do I file my 2004 taxes if my divorce is final in 2004? Will it be single then?
A.Your mortgage interest will be reported by, and you will get a statement from, the mortgage holder under the primary SSN used to take out the loan. IRS will assume that whoever's SSN appears 1st on the 1098 is entitled to the deduction. Just like 1099's for joint interest or dividends. You may claim anything and attach an explanation or supporting documents, but be prepared for an audit. This should have been handled in the settlement, but since it was not, it needs to be brought up before the divorce decree is entered. If you are divorced on or before 12/31, you file as single. If you are still married on 12/31, you may file jointly, if she'll cooperate Any discrepancy can trigger an audit. More likely, however, is that the return of whomever files first will be honored and the return of the person who files second will be held pending resolution. You will have to prove your case.
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