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Tax help! Just can't figure out where to put this deduction.


Courtjester

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So the quick version is I prepare taxes for a couple members of my family. I am not a CPA or anything like that, but they are all salary very easy to do tax returns and they throw me a 12-pack or two for my trouble. So pretty good gig.

However, this year I am running into a problem with my brother's return. He refinanced his home in January 2013 FHA loan. So the end of last year, he gets his end of the year mortgage statement that reflects this huge pre-paid mortgage insurance amount that was part of the refi. Under IRS rules you don't get to claim that whole amount in one pop--you have to break it up over 84 months (so basically take that big number divide it by 7) and you can claim that amount on the next 7 years returns.

Last year no problem because he had the statement from the mortgage company showing that big figure so I could enter that pro rated number in box 13 of the schedule A. But the problem is this year, he has obviously received his 2014 mortgage statement showing what he paid this year as far as Insurance out of his Escrow so that number will go in box 13, but where can I put that carry over number from last year? And what substantiating document shoudl I use? If I add this year's insurance amount, plus the carry over and put that in box 13--the numbers won't match 2014 Mortgage Statement sent by the lender and that could red flag his return.

I went to the local IRS office and posed this as a general question and they basically said I should have just claimed all of it for him last year because odds are it wouldn't have been caught,. Or their other suggestion is that he file a paper return for the next 6 years with an attached affidavit explaining what he is doing, but that means his refund would probably get to him in 3 months if he is lucky.

It is approximately $800 each year, so that is fair deduction that I don't want to just leave on the table for him, ,but I don't want my mistake to get him audited. Thoughts??

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I would just add the amortized amt to this years' amount and document well. I actually think that's the right way to do it.

I think this is too. I use TaxAct to do the returns and I am not sure if it has the ability for written explanations next to deductions. I need to play around with it. I am trying to avoid a written return for him because I know him and his wife count on their return to do things and I am guessing telling them they aren't getting the refund until March or April will not go over well.

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I would just add the amortized amt to this years' amount and document well. I actually think that's the right way to do it.

I think this is too. I use TaxAct to do the returns and I am not sure if it has the ability for written explanations next to deductions. I need to play around with it. I am trying to avoid a written return for him because I know him and his wife count on their return to do things and I am guessing telling them they aren't getting the refund until March or April will not go over well.

Add it to the amount and keep good documentation. Chances are the IRS isn't calling anytime soon but if they do you have all the backup explaining what you did & why.

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