Here's what you get when the government owns the banks

IRS to mine payment data on mortgages

The Internal Revenue Service (IRS) will study whether it should make greater use of data on mortgage-interest payments provided to it by banks. The program, which searches for inconsistencies between mortgage payments and income, is currently used to send notices to non-filers who it believes should have filed a return. It could be used to target for audits individuals who report less income than they paid in mortgage interest.

The move will expand a regional research project on mortgage interest to a nationwide level by December 2011. Initiatives such as these typically involve examination of a small number of tax returns to evaluate new enforcement strategies.

According to the Treasury inspector general, tens of thousands of homeowners who paid more than $20,000 in mortgage interest in 2005, the latest tax data available when the Treasury inspector general’s office began its audit last year, either didn’t file a tax return or reported income that appears insufficient to cover their mortgage interest and basic living expenses.

Source - Martin Vaughan at martin.vaughan@dowjones.com