How to File Form 1098 for Mortgage Interest

Form 1098, known as the Mortgage Interest Statement, is an IRS information return used to report mortgage interest, points, and mortgage insurance premiums totaling $600 or more received by a lender or financial institution during a calendar year. It provides borrowers with information to claim tax deductions related to home mortgage interest, ensuring compliance for both lenders and borrowers.

Understanding Filing Requirements

Specific entities and individuals must file Form 1098. Financial institutions, governmental units, and any person operating in a trade or business who receives $600 or more in mortgage interest from an individual are required to file. If multiple mortgages exist, a separate Form 1098 is required for each loan meeting the $600 threshold.

Reportable mortgage interest includes interest on a loan secured by real property, such as land and structures. This applies to primary residences, second homes, vacation properties, and land. Interest received from corporations, partnerships, trusts, estates, associations, or companies (other than sole proprietors) does not require a Form 1098 filing. Interest on business loans not secured by real property is also not reported on this form.

Accurate borrower information is important for Form 1098 completion. The filer needs the borrower’s full name, address, and Taxpayer Identification Number (TIN), typically a Social Security Number (SSN). The form also requires the total mortgage interest received, any points paid, and mortgage insurance premiums collected. Ensuring the correctness of the borrower’s TIN helps avoid potential IRS issues.

Mortgage acquisition debt and home equity debt both relate to home loans, and interest paid on either can be reported on Form 1098. Mortgage acquisition debt is incurred to buy, build, or substantially improve a home. Home equity debt is secured by the home but used for other purposes. While the form combines these, the distinction is significant for the borrower’s potential deduction limits, as detailed in IRS Publication 936.

Completing Form 1098

Obtaining the official Form 1098 is the initial step. The form is available from the IRS website or through tax software providers. Using the most current version is important for compliance.

Filling out Form 1098 requires careful attention to each box for accuracy. Box 1 reports the total mortgage interest received from the borrower(s) during the calendar year, excluding points. This includes interest on a mortgage, home equity loan, or line of credit secured by real property. Box 2, if applicable, indicates the outstanding mortgage principal as of January 1 of the reporting year. Box 3 shows the mortgage origination date.

Box 4 reports any refunds of overpaid interest totaling $600 or more made to the borrower during the year, if the overpayment was originally reported on a prior year’s Form 1098. Mortgage insurance premiums (MIPs) are entered in Box 5. Box 6 reports points paid on the purchase of a principal residence, generally in the year of closing. The filer’s information (name, address, and TIN) and the borrower’s details must be accurately entered.

The filer is responsible for accurate reporting. Verifying all figures and borrower information, particularly the Taxpayer Identification Number, helps prevent discrepancies and potential penalties. The borrower’s account number is required if multiple accounts exist for a single payer filing more than one Form 1098. The IRS encourages including an account number for all Forms 1098 filed.

Submitting Your Form 1098

After completing Form 1098, filers must adhere to specific deadlines for submission to the IRS and for providing copies to borrowers. The deadline for furnishing copies to borrowers is January 31 of the year following the calendar year for which interest was paid. For submitting forms to the IRS, the deadline is February 28 for paper filing, or March 31 for electronic filing. Extensions may be available, but requests must be submitted timely.

Electronic filing (e-filing) is required if a filer submits 10 or more information returns of any type, including Form 1098. This threshold applies to the aggregate sum of various forms. The IRS Filing Information Returns Electronically (FIRE) System is the platform for e-filing. To use the FIRE System, filers must first obtain a Transmitter Control Code (TCC), which can take several weeks to process. Once a TCC is secured, filers can transmit their formatted files through the FIRE website and check the submission’s acceptance status.

For those not required to e-file, paper filing remains an option. Paper Forms 1098 must be accompanied by Form 1096, Annual Summary and Transmittal of U.S. Information Returns. Form 1096 acts as a cover sheet, summarizing the information returns. The mailing address for paper submissions varies and can be found in the official IRS instructions for Form 1098 or the General Instructions for Certain Information Returns.

Providing borrowers with their copy of Form 1098 is a crucial step. This can be done via mail or, with consent, electronically. The copy provided to the borrower, often Copy B, contains the information needed to prepare their tax returns and potentially claim the mortgage interest deduction. Adhering to the January 31 deadline ensures borrowers have ample time to meet their tax obligations.

Correcting Form 1098 Errors

Discovering an error on a previously filed Form 1098 requires prompt correction to maintain compliance. Corrections are needed for scenarios such as an incorrect amount, a wrong Taxpayer Identification Number (TIN), or an inaccurate name for the filer or borrower. Addressing these errors quickly helps prevent potential penalties and ensures accurate tax reporting.

Correcting a Form 1098 involves preparing a new form with an “X” marked in the “CORRECTED” box at the top. If the error is an incorrect money amount, the corrected form should show the accurate figures in the relevant boxes, along with the original filer and borrower information. For issues like an incorrect borrower name or TIN, a specific correction process is followed, often involving two separate returns: one to void the original entry and another to provide the correct information.

Submitting corrected forms to the IRS follows procedures similar to original filings. If the original form was e-filed, the correction should also be e-filed through the IRS FIRE System, by selecting the “Correction” option within the e-filing software. For paper filings, a corrected Form 1098 should be submitted with a new Form 1096. Do not include a copy of the originally filed incorrect return when submitting paper corrections.

Once the corrected form is submitted to the IRS, a corrected copy must also be provided to the borrower. This ensures the borrower has accurate information for their tax records and can amend their tax return if necessary. The corrected copy sent to the borrower should be clearly marked as “CORRECTED.”