Surface Transportation Act of 2015 – Information Returns on Qualified Mortgage Loans & New Requirements

On July 31, 2015, the president signed into law the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (H.R. 3236) (the Act). The Act was necessary to provide a three-month extension of federal highway funding. Interestingly, much of the funding for the Act comes from various tax filing compliance changes for taxpayers. Additionally, there are new requirements in the Act that impact and include new information required to be reported on qualified mortgage loans. 

Currently, Internal Revenue Service (IRS) regulations require an interest recipient (lender) to furnish separate information returns for each qualified mortgage for which it receives $600 or more in interest for a calendar year. The return must include: 

  • The name and address of the individual from whom the interest was received; 
  • The amount of interest (other than points) received for the calendar year; 
  • The amount of points on the mortgage received during the calendar year and whether such points were paid directly by the borrower; and 
  • Such other information as the IRS may prescribe, such as the borrower’s Taxpayer Identification Number. 

Effective with Information returns filed after December 31, 2016, a provision in the Act expands the information required on information returns provided by a lender. In addition to the information described above, lenders must also include the following additional information: 

  • The amount of the outstanding mortgage principal as of the beginning of the calendar year; 
  • The mortgage origination date; and 
  • The address (or other description, in the case of a property without an address) of the property that secures the mortgage.

Since the new reporting requirements apply to information returns filed, and customer statements provided after December 31, 2016, calendar year 2016 information returns will be affected by these new reporting requirements since statements for 2016 must be provided on or before January 31, 2017.

Unless the filer can demonstrate reasonable cause, penalties may be imposed for failure to file correct information returns and correct customer statements. Effective for information returns filed after December 31, 2015, potential penalties are as follows:

  • $50 per information return if you correctly file within 30 days (by March 30 if the due date is February 28); maximum penalty $500,000 per year ($175,000 for small businesses).
  • $100 per information return if you correctly file more than 30 days after the due date but by August 1; maximum penalty $1,500,000 per year ($500,000 for small businesses).
  • $250 per information return if you file after August 1 or you do not file required information returns; maximum penalty $3,000,000 per year ($1,000,000 for small businesses). 

A small business is defined as a business in which the average annual gross receipts for the three most recent tax years (or for the period you were in existence, if shorter) ending before the calendar year in which the information returns were due, are $5 million or less.    

Since the changes to the information reporting requirements are effective for returns filed after December 31, 2016, interest recipients (lenders) should assess potential system changes needed to report the additional information required.    

About the Author 

Wayne Boody is a Senior Manager in the DHG Tax Advisory practice. Wayne has 40 years of experience in the Banking Industry, with specific focus on Tax information Reporting.  Prior to joining DHG, Wayne worked for a large regional bank, retiring as a Senior Vice President after almost 40 years. For the final 25 years of his banking career, Wayne managed the tax information reporting function and worked with internal bank business units to ensure compliance with the regulations, processes and requirements related to 1099/1098/1042-S filings to customers, the Internal Revenue Service and state agencies. Wayne also has a solid working knowledge of the Foreign Account Tax Compliance Act (FATCA). 

About DHG Financial Services 

DHG Financial Services, a national practice of Dixon Hughes Goodman, focuses on publicly traded and privately-held financial services companies across the U.S. Our 30 financial services partners and more than 300 dedicated professionals provide you with in-depth, specialized industry knowledge and a wide range of accounting, tax and advisory services to address issues facing your industry in today's challenging environment. For more information, visit www.dhg.com/financial-services.

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