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Landing the big deal: Josh Simon brings entrepreneurial streak to commercial real estate (Video)


“I used to go door-to-door. I had business cards made,” said Simon, founder and president of Scottsdale-based commercial real estate company SimonCRE. “I was very motivated.” Simon — who moved to Arizona when he was 12 — always has been motivate


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Published: Sept 16, 2009 8:00 a.mET Share .st0{fill:#FFFFFF;} .st1{fill:#E12828;} .st2{fill:#FAEAEA;enable-background:new ;} .st3{fill:#FAD4D4;enable-background:new ;} IRS program will use home-loan deduction data to snag tax cheats window.videoDomain = 'https://video-api.wsj.com'; By EvaRosenberg Tax columnist LOS ANGELES (MarketWatch) -- The mortgage-interest deduction claimed by millions of homeowners every year may prove to be a useful window for the IRS to peek into taxpayers' income situation -- and potentially reap millions of dollars in unpaid taxesFirst, some historyEach year, your lender sends you a Form 1098, known as the mortgage-interest statementThe IRS gets a copy, tooIt shows the total interest you paid as part of your monthly mortgage payment More on taxes • Tax breaks for everyone • 20 capital-gains tips • 6 ways to avoid an audit • Taxes after the death of a spouse • Fix your home, save on taxes • How to deduct commuting costs • 7 little-known tax breaks for your Historically, the IRS computers have been matching the totals on those Forms 1098 to ensure that you didn't deduct more mortgage-interest expense than the lender reportedWhen deductions are higher than the total amounts on all Forms 1098 with your Social Security number and that of your spouse, the IRS sends you a letterThey ask you to identify the lender whose interest you are deductingThe goal is twofold: To ensure you don't deduct interest you didn't pay, and to ensure that the person you paid reported the interest incomeThis makes perfect sense New use for 1098s But there's an interesting way to use those 1098 forms to catch non-filers and tax cheats, according to a new report by JRussell George, the Treasury Inspector General for Taxpayer Administration, also known as TIGTA According to the TIGTA report, the IRS had their computer match up filed tax returns with Form 1098s from 2004 and 2005 showing residential mortgage interest paid by individualsThere were hundreds of thousands of 1098s that had no corresponding tax return on fileAfter some filtering, IRS sent notices to 227,019 non-filers asking that they either file their tax returns or explain why they do not need to file(Many people were living on savings or tax-free income.) As a result, nearly 70,000 new tax returns were filed for those two years by the non-filersFor 2005, about 28,000 of those tax returns generated $276 million in assessmentsTIGTA estimates that in a given year, this type of audit system will generate between $352 million and $900 million per year in additional tax assessmentsOf course, simply assessing taxes does not guarantee they can be collectedRemember, many people who earned a great deal of money last year or the year before are nearly broke now What's the likelihood that this money will be collected? George and his staff don't deal in that kind of informationAnd the IRS doesn't publish statistics that track collections by these criteriaBut look at this population logically: The Form 1098 shows mortgage interest actually paid, not just assessedThese people are paying mortgage interest of $10,000 or more (the TIGTA study considered Forms 1098 with interest of $20,000 or more)People wouldn't waste that kind of money without equity in the home Therefore, even if they don't pay the taxes, when the IRS or a state files a lien, there's apt to be enough equity in the house to force the taxpayer to pay the tax bill if they refinance or sell This is a brilliant collection tactic, don't you think? Expect to see more of this from IRS In response to TIGTA's recommendations, the IRS said it will expand an existing local audit project on the mortgage-interest deduction to a Nationwide Compliance Initiative ProjectIRS's Small Business/Self-Employed Division will study existing processes to ensure that mortgage interest is appropriately considered when selecting non-filer cases for further examinationDon't expect to see this implemented within the next year or so, according to Eric Smith, an IRS spokesmanWho will be targeted? Smith says it's premature to speculate on the contours of any possible programSo, you can take a deep breath -- for nowBut will a similar program be coming soon to a state near you? California started a pilot program in 2007, says John Barrett, a spokesman for the California Franchise Tax BoardThe FTB sent out 56,000 notices to folks with mortgage interest of $10,000 or moreThe state collected about $40 million dollarsTo select the winners of this mortgage lottery, California runs a screening process, eliminating folks whose records show indications of savings or other non-taxable sources of fundsAfter all, as long as worldwide income is less than $14,845 in 2008, there is no need to file a California tax return With these IRS and California pilot programs showing such rich results, you can expect your state to implement this kind of scavenger hunt, tooGet ready! How will this affect you? When you get a notice, there are two ways to respondThe right way and the wrong wayConsider the following two examplesIn West Hills, Calif., tax attorney Bruce Drooks has a client who received a notice from the California Franchise Tax Board asking how he pays his mortgageHis client responded to the notice on his own, before contacting Drooks, saying the source of the mortgage money was gifts from familyCalifornia thanked the gentleman and promptly requested proof, including copies of the checks or wire transfers used to give him the money, the names and Social Security numbers of the people making his mortgage payments, and the first two pages of their tax returns! In fact, the FTB wants this information for any other years they've been paying his mortgageThis could get uglyAlthough Drooks' client is undoubtedly truthful, this is going to be a major inconvenience to the family members helping him outAcross the country, Laurence Rubin, a certified public accountant and a partner at Aronson & Company in Rockville, Md., has a client whose letter from the IRS arrived a couple of months agoThis fellow's Form 1098 mortgage interest showed $45,000, and he had not filed a tax returnThey guy didn't respond to the IRS himselfHe brought the notice to Rubin, who responded for him Rubin has a philosophy when it comes to the IRS and state tax-agency correspondenceHe aims to settle the matter at once, rather than letting it turn into some agent's career projectRubin's response included proof of the source of the funds -- the relevant page of a divorce agreement showing a very generous settlementSince he knew the IRS would ultimately ask for it anyway, Rubin included a copy of the bank statement showing that money in the bank account, and how little interest it was earning With all the relevant back-up documents, Rubin outlined the situation, proving the client's income is too low to require filing a tax returnRubin's client got a thank-you letter from the IRS saying the file was closedSee, that's how you do itDon't equivocate or be vagueGive the agency useful information straight off and you won't get the kind of terrifying letter Drooks' client got from CaliforniaReview your tax return before filing it Read Page 14 of the TIGTA reportIt includes an example of how the IRS works backwards from your tax return or the data they have on file from W-2s, 1099s, 1098s, etcto compute how much money you need to live on in the area where you liveSee the report (PDF)Use this concept to review your own tax return before filing itIf the bottom line on your tax return does not support your living expenses, consider adding a statement to your tax return explaining how you're paying your living expensesIs it non-taxable income from state bonds, or draws from partnerships? Are you drawing down savings? Are you a trust-fund baby, where the trust is paying all the taxes? The IRS doesn't know any of this until you tell them A word of warning: Did you know that if you don't file a tax return, the IRS and your state can audit that year forever? Yes indeed! If the government is really desperate for money and finds that you owe them money and have the funds to pay the taxes, bewareIf you have not filed tax returns for years, file them now and close the statute of limitations for audits and collectionsOtherwise the un-filed years are always in jeopardyOne last tip, file a tax return for yourself or your senior relatives, even if you have no filing obligationIt locks up that statute of limitations and protects you from intrusive inquiries years later, when tax authorities are trying to raise money Eva Rosenberg is the founder of TaxMama.com and an enrolled agent licensed to represent taxpayers before the IRSShe is the author of the new e-book "The 100% Home-Based Business Tax Solution." Reach her at taxwatch@gmail.com More from MarketWatch More Coverage How biased is your news source? 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Mortgage Rates Powered by This advertisement is provided by Bankrate, which compiles rate data from more than 4,800 financial institutionsBankrate is paid by financial institutions whenever users click on display advertisements or on rate table listings enhanced with features like logos, navigation links, and toll free numbersDow Jones receives a share of these revenues when users click on a paid placement. Other NewsFrom Our Partners (!) Found: Financial Advisors in Your Neighborhood SmartAsset.com Don't Settle for 0.01% on Your Savings Interest - Earn up to 1.50% SmartAsset.com This Site Finds the Top 3 Financial Advisors Near You SmartAsset.com This Free Mortgage Calculator Makes Home Buying a Breeze SmartAsset.com These Banks Offer Over 140x what the Big Banks Offer on Your Savings SmartAsset.com Data Provided By Today's Interest Rates Mortgage Equity Savings Auto Credit Cards 30 yr fixed Jumbo 4.61% 30 yr fixed 4.32% 15 yr fixed 3.73% 10 yr fixed 3.62% 30 yr fixed refi 4.31% 15 yr fixed refi 3.7% 5/1 ARM 4.23% 5/1 ARM refi 4.26% National averages from Bankrate.com $30K HELOC 3.45% $50K HELOC 3.52% $75K HELOC 3.42% $100K HELOC 3.52% $30K Home Equity Loan 5.14% $50K Home Equity Loan 4.84% $75K Home Equity Loan 4.84% $100K Home Equity Loan 4.72% National averages from Bankrate.com 5 yr CD 1.63% 2 yr CD 1.04% 1 yr CD 0.86% MMA $10K+ 0.29% MMA $50K+ 0.44% MMA Savings 0.34% MMA Savings Jumbo 0.49% National averages from Bankrate.com 60 Mo Used Car 3.88% 48 Mo Used Car 3.87% 36 Mo Used Car 3.88% 72 Mo New Car 3.82% 60 Mo New Car 3.66% 48 Mo New Car 3.56% 60 Mo Auto Refi 2.98% 36 Mo Auto Refi 2.6% National averages from Bankrate.com AvgAPR Last Week 6 Months Low Interest 13.14% 13.14% 12.88% Business 13.93% 13.93% 13.68% Balance Transfer 15.63% 15.63% 15.37% Student 15.92% 15.92% 15.70% Airline 16.41% 16.41% 16.07% Reward 16.51% 16.51% 16.23% Cash Back 16.67% 16.67% 16.37% Instant Approval 18.82% 18.82% 18.60% Bad Credit 23.62% 23.62% 23.46% Source: CreditCards.com Eva Rosenberg Eva Rosenberg is a tax columnist for MarketWatchYou can follow her on Twitter @TaxMama. $(function () { if (typeof dianomiUnitCallback !== 'undefined') { var dianomiCallback = new dianomiUnitCallback('articlerightrail', 2583, 'dianomiRightRail', ', '); dianomiCallback.initialize('dianomiRightRail'); } }); $(function() { if (window.MutationObserver) { // arrive breaks if MutationObserver not supported by browser $("#dianomiRightRail").arrive(".dianomiContent", function () { $("#dianomiRightRail").unbindArrive(); $("#dianomiRightRail").trigger("rendered"); }); } else { // TODO ~ remove; listening to this event causes performance problems $("#dianomiRightRail").on('DOMNodeInserted', function () { $("#dianomiRightRail").off('DOMNodeInserted'); $("#dianomiRightRail").trigger('rendered'); }); } }); Eva Rosenberg Eva Rosenberg is a tax columnist for MarketWatchYou can follow her on Twitter @TaxMama. 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