CORRECTING ERRONEOUS IRS FORM 1098's
TABLE OF CONTENTS:
The IRS Form 1098 is commonly sent out at the end of each calendar year by mortgage companies and banks as proof of interest that was paid on outstanding loans in their inventory. One form is prepared annually for each person who has a loan with the bank or mortgage company. The 1098 Form:
Can only be filed in the case of mortgage payment recipients who are are engaged in a "trade or business". Companies that are not engaged in a "trade or business" may NOT file this form, which includes most companies. Here is what the instructions for this form say:
Who Must File
File this form if you are engaged in a trade or business and, in the course of such trade or business, you receive from an individual $600 or more of mortgage interest on any one mortgage during the calendar year. You are not required to file this form if the interest is not received in the course of your trade or business. For example, you hold the mortgage on your former personal residence. The buyer makes mortgage payments to you. You are not required to file Form 1098.
[IRS Form 1098 Instructions, p. 1]
Can NOT be filed against "nonresident aliens" who have no real property located in the "United States", as defined in 26 U.S.C. §7701(a)(9) and (a)(10). Below is the IRS Form 1098 instructions which confirm this:
Nonresident Alien Interest Payer Governmental unit.
You must file Form 1098 to report interest paid by a nonresident alien only if all or part of the security for the mortgage is real property located in the United States. Report the interest based on the following:
[IRS Form 1098 Instructions, p. 2]
- If the interest is paid within the United States, you must request from the payer the applicable Form W-8 (withholding certificate) as described in Regulations section 1.1441-1(e)(1)
- If the interest is paid outside the United States, you must satisfy the documentary evidence standard described in Regulations section 1.6049-5(c).
Can only be filed in connection with real property that is located in the "United States", as defined in 26 U.S.C. §7701(a)(9) and (a)(10). That is because only earnings "effectively connected with a trade or business within the United States" are taxable under I.R.C. Subtitle A, as confirmed by I.R.C. 26 U.S.C. §861 and 26 U.S.C. §864(c)(3). Below is the definition of "United States" from the Internal Revenue Code which shows what a "U.S. source" is:
(a)(9) United States
The term ''State'' shall be construed to include the District of Columbia, where such construction is necessary to carry out provisions of this title.
The term "trade or business" is legally defined as follows:
"public office" as used above is then legally defined as follows:
“Essential characteristics of a ‘public office’ are:
(1) Authority conferred by law,
(2) Fixed tenure of office, and
(3) Power to exercise some of the sovereign functions of government.
(4) Key element of such test is that “officer is carrying out a sovereign function’.
(5) Essential elements to establish public position as ‘public office’ are:
(a) Position must be created by Constitution, legislature, or through authority conferred by legislature.
(b) Portion of sovereign power of government must be delegated to position,
(c) Duties and powers must be defined, directly or implied, by legislature or through legislative authority.
(d) Duties must be performed independently without control of superior power other than law, and
(e) Position must have some permanency.”
[Black’s Law Dictionary, Sixth Edition, p. 1230]
Nowhere in the entire I.R.C. is the above definition of "trade or business" expanded to include any activity other than a "public office", which is defined above, and therefore it is all-inclusive and limited to "public offices". This is also confirmed by the rules of statutory construction, which say on this subject:
“Expressio unius est exclusio alterius. A maxim of statutory interpretation meaning that the expression of one thing is the exclusion of another. Burgin v. Forbes, 293 Ky. 456, 169 S.W.2d 321, 325; Newblock v. Bowles, 170 Okl. 487, 40 P.2d 1097, 1100. Mention of one thing implies exclusion of another. When certain persons or things are specified in a law, contract, or will, an intention to exclude all others from its operation may be inferred. Under this maxim, if statute specifies one exception to a general rule or assumes to specify the effects of a certain provision, other exceptions or effects are excluded.”
[Black’s Law Dictionary, Sixth Edition, p. 581]
"When a statute includes an explicit definition, we must follow that definition, even if it varies from that term's ordinary meaning. Meese v. Keene, 481 U.S. 465, 484-485 (1987) ("It is axiomatic that the statutory definition of the term excludes unstated meanings of that term"); Colautti v. Franklin, 439 U.S. at 392-393, n. 10 ("As a rule, `a definition which declares what a term "means" . . . excludes any meaning that is not stated'"); Western Union Telegraph Co. v. Lenroot, 323 U.S. 490, 502 (1945); Fox v. Standard Oil Co. of N.J., 294 U.S. 87, 95-96 (1935) (Cardozo, J.); see also 2A N. Singer, Sutherland on Statutes and Statutory Construction § 47.07, p. 152, and n. 10 (5th ed. 1992) (collecting cases). That is to say, the statute, read "as a whole," post at 998 [530 U.S. 943] (THOMAS, J., dissenting), leads the reader to a definition. That definition does not include the Attorney General's restriction -- "the child up to the head." Its words, "substantial portion," indicate the contrary."
[Stenberg v. Carhart, 530 U.S. 914 (2000)]
The requirement for Information Returns, including the IRS form 1098, originates from Internal Revenue Code section 6041, which says under paragraph (a) that all payments of over $600 that are made in connection with a "trade or business" must have Information Returns filed on them. To wit:
(a) Payments of $600 or more
All persons engaged in a trade or business and making payment in the course of such trade or business to another person, of rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income (other than payments to which section 6042 (a)(1), 6044 (a)(1), 6047 (e), 6049 (a), or 6050N (a) applies, and other than payments with respect to which a statement is required under the authority of section 6042 (a)(2), 6044 (a)(2), or 6045), of $600 or more in any taxable year, or, in the case of such payments made by the United States, the officers or employees of the United States having information as to such payments and required to make returns in regard thereto by the regulations hereinafter provided for, shall render a true and accurate return to the Secretary, under such regulations and in such form and manner and to such extent as may be prescribed by the Secretary, setting forth the amount of such gains, profits, and income, and the name and address of the recipient of such payment.
If you would like to learn more about what "trade or business" means or how "domicile" affects one's status as a "nontaxpayer", please refer to our free exhaustive memorandums of law on the subject available below:
Based on the above, the average American domiciled within a state of the Union on other than federal territory does not maintain real property in the "United States" as legally defined, and the mortgage company he is dealing with also is not a "U.S. person" nor is it usually REALLY engaged in a "trade or business" either. Therefore, the 1098 reports sent out by financial institutions relating to mortgage loans in their portfolio in most cases:
(g) Special rules for taxpayer identifying numbers issued to foreign persons--
(1) General rule--
(i) Social security number.
A social security number is generally identified in the records and database of the Internal Revenue Service as a number belonging to a U.S. citizen or resident alien individual. A person may establish a different status for the number by providing proof of foreign status with the Internal Revenue Service under such procedures as the Internal Revenue Service shall prescribe, including the use of a form as the Internal Revenue Service may specify. Upon accepting an individual as a nonresident alien individual, the Internal Revenue Service will assign this status to the individual's social security number.
The IRS Form 1098 is sent to both the IRS and the State Revenue Agencies. This information is also shared by the IRS with the State Revenue Agencies under what is called the "FedState" program. This program was created to enforce the Buck Act, 4 U.S.C. §103-105 and 5 U.S.C. §5517. Both the IRS and State revenue agencies commonly send out "Request for Return" notices to unsuspecting homeowners who have these false IRS Form 1098's filed against them. Those persons who are "nontaxpayers" and "nonresident aliens" must ensure that these false IRS Form 1098's are not filed by their mortgage company in order to avoid receipt of these wrongful collection notices. This article will show you how to correct these reports and will provide forms and tools for making the correction.
The Corrected IRS Form 1098 is for use primarily in undoing the damage done by private financial institutions, who usually because of their ignorance of the law, either complete Information Returns such as the Form 1098 when they don't need to, or who put false information on these returns. If you would like to prevent this problem from happening in the future, then we suggest using our free form below:
Demand for Verified Evidence of "trade or business" Activity: Information Return, SEDM Form #04.007
Whenever we complete government forms, the first thing to remember is that even the Standard government forms usually contain false presumptions or statements that will prejudice one's rights and which typically would slip by unnoticed by the general public. This is especially true of the "words of art" (OFFSITE LINK) used on the form and the perjury statement at the end of the government form. Therefore, it is usually unwise to use the government's Standard forms, and to instead use a modified or what we call an "Amended" form. Amended forms are the only kinds of forms we recommend and the Family Guardian Website (OFFSITE LINK) contains a catalog of both the original government forms and the Amended versions below:
http://famguardian.org/TaxFreedom/Forms/IRS/IRSFormsPubs.htm (OFFSITE LINK)
Whenever possible, you must use the Amended forms or else you will suffer having your rights unjustly prejudiced by the government. All of the SEDM response letters which include government forms as exhibits or attachments include blank Amended, and not Standard, government forms, and you should not substitute the Standard government form unless compelled to do so. Click here to see a list of the changes made to the Standard forms to make them into the Amended forms if you are curious. To give you one glaring example of a TRAP that greedy state lawyers set which should be avoided at all costs, take a look at the Oregon "Employees Substitute Wage and Tax Statement" form. Notice it has "Taxpayer's Signature" at the end and "Employee" at the top. There is no way to fill out this form and send it in without creating TWO false presumptions:
The state of Oregon DOES NOT have a substitute form suitable to be submitted by those who claim to be neither "taxpayers" nor "employees" and who want to zero out false reports by their private employers, who coerced them into participating because they quite frankly do not want people exiting the fraudulent tax system. WATCH OUT!
All the above preliminaries now aside, we can get to work showing you how to fill out the IRS 1098 to attach to your IRS or state response letter. First, let's review what the instructions for form 1098 say themselves about correcting an erroneous 1098 report, from page GEN-12 of the 2004 "General Instructions for Forms 1098, 1098, 5498, and W-2G":
1. Prepare a new information return.
2. Enter an "X" in the "CORRECTED" box (and date (optional)) at the top of the form.
3. Correct any recipient information such as money amounts and address. Report other information per original return.
Below is a link to both the Standard and Amended IRS form 1098, so you can compare and see the differences for yourself. The Amended forms are "fillable" with the free Adobe Acrobat Reader. They have been preinitialized with the most common values to save you time.
Form Standard IRS form Amended version 1098 Click here Click here 1098 Instructions Click here NA
Remember the following requirements for the IRS Form 1098:
WARNING!: If you do not have any earnings in connection with a "trade or business" (OFFSITE LINK) , you also cannot be taking any deductions (26 U.S.C. §162), earned income credit (26 U.S.C. §32), or apply a graduated rate of tax (26 U.S.C. §1) if you file a return. All such "privileges" will make you into a person engaged in a "trade or business". The rate on all "gross income" for those with no earnings connected with a "trade or business" is a flat 30% for Nonresident aliens, as indicated under 26 U.S.C. 871(a). This is normally not a big deal, because the only type of gross income that is not specifically identified as connected with a "trade or business" is Social Security under 26 U.S.C. §861(a)(8). Click here (OFFSITE LINK) for details.
At least annually at the beginning of the year, it is a good idea to:
If you did not follow the above guidance, you may receive a collection notice from the IRS or a state Revenue Agency, asking you to file a return. Below is an example, the California FTB 4600K notice, which illustrates what we mean:
They will do this because of the false presumptions the form creates that connect the mortgage payment to "trade or business" activity and connect you to federal "employment", because the report has an SSN or TIN on it. We have prepared a sample Memorandum of Law that you can use to attach to your response to such a "Request for Return" letter that you can use to explain to the IRS or State Revenue Agency:
Below are some forms you can use to do this. Feel free to modify the form, but please don't do so unless you have REALLY done your homework, because you are likely to create more problems for yourself than you solve in the process, mostly because of ignorance. Click on the links below:
W-2's, 1098's, and 1099s are called "Information Returns" by the IRS. Below is the overall process for correcting erroneous or false W-2's, 1099's, or 1098's so you know exactly how it works and what to expect:
2.1 Complete form W-2c for all years false W-2 reports were made against you.
2.2 Complete corrected form 1042s for all years false W-2 reports were made against you.
2.3 Complete corrected form 1098s for all years false W-2 reports were made against you.
2.4 Complete Amended/Corrected
form 1099's for all false 1099 forms filed against you. See our
article below for information on how to do this:
4.1. To the Data Processing Center address in the previous step.
To the IRS Service Center
where you would normally file returns WITH THE FOLLOWING COVER LETTER.
For nonresident aliens, this would be the International processing center, which was at the following address last we checked:
Internal Revenue Service; P.O. Box 80102; Cincinnati, OH 45280-0002.
Corrected Information Return Attachment Letter, Form #04.002
If you would like more information about Information Returns processing, visit the IRS website at:
The table below lists where corrected information returns must be filed as of 2008:
Table 1: Place to file corrected information returns
|Forms||IRS Publication containing address||Applicable Region||Place to file|
Instructions for Form 1042-T, Catalog Number 28848W
Internal Revenue Service
Ogden Service Center
P.O. Box 409101
Ogden, UT 84409
1098, 1099, 5498, W-2G
1099 General Instructions (PDF) Instructions for Forms 1099, 1098, 5498, and W-2G, Catalog #27976F, Sections C and D
Alabama, Arizona, Arkansas, Connecticut, Delaware, Florida, Georgia, Kentucky, Louisiana, Maine, Massachusetts, Mississippi, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, Texas, Vermont, West Virginia
Department of the Treasury
Internal Revenue Service
Austin, TX 73301
Alaska, California, Colorado, District of Columbia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Maryland, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, North Dakota, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Utah, Washington, Wisconsin, Wyoming
Department of the Treasury
Internal Revenue Service
Kansas City, MO 65999
W-2 and W-3
Instructions for Forms W-2 and W-3, Catalog Number 25979S
Social Security Administration
Data Operations Center
Wilkes-Barre, PA 18769-0001
Q1: What if I don't have the original 1098 forms that I want to zero out that I can take the original information from to put on the 1098?
A1: You can call the provider and ask them to fax you the 1098 information again. Alternatively, you can file a 1098 that simply says "All sources" under item 5 on the 1098 form.
Q2: Is it ever too late to submit these forms for past years?
A2: No. There is never a wrong time to do the right thing. As long as the government has records of receipt of "gross income", then it is our duty to rebut the wrong evidence, no matter how old it is, because sooner or later, they will use it to come back to us and demand that we either file or pay.
Q3: Should I fill out the 1098 for past years, or only for the years they are going after me for?
A3: It's always safest to file 1098 forms for all years that a person didn't file a return. This is a preventive measure if they decide later on to go after a person later for those years.
The form 1098 is frequently used when corresponding with the IRS and state taxing authorities as a way to remind the government that a person has no taxable income. Once you have completed the form for a particular tax year, it is best to keep the original in a safe place and reuse it by photocopying it and attaching it to correspondence. This will save you lots of work and time. We scan in ours and make it into an Adobe Acrobat PDF and just reprint it whenever we need it.
If mortgage companies and lenders would obey the law in the first place, their false 1098 reports would never be filed. You can prevent these false reports in the first place by educating all of your business associates, and especially the lenders you deal with. We have prepared a document you can send to lenders and mortgage companies to educate them and prevent these false reports from being filed below. We encourage you to use this, because the more lenders who get educated, the greater the chance that others they lend to will be removed from the fraud, slavery, and compelled association that these false reports produce. The following specific steps are recommended to bring errant lending companies into compliance with the law:
Submitting the following form to the filer of the false form and demanding that they prove with evidence that you are engaged in a "trade or business". Do so with a Certificate of Service and have it notarized. Send via certified mail or personally by a neutral third party. This will provide formal notice and legal evidence that they have been notified. If they do not rebut the information, you have readily admissible evidence that their conduct beyond that point becomes legally actionable and FRAUDULENT.
Demand for Verified Evidence of "trade or business" Activity: Information Return, SEDM Form #04.007
After they have been confronted about the false information returns, if they persist and insist on continuing to violate the law, you can write the IRS to ask them to correct the false information return and also financially and civilly penalize the employer for submitting false information pursuant to 26 U.S.C. §6702. Starting in January 2007, the IRS posted a notice warning those who submit false 4852's that they could be civilly penalized for submitting a false return. This penalty applies just as readily to the submitters of the original false information return as it does to those who are submitting the corrections. Click here to view the current version of the form that shows the penalty language. You can cite the language on the form as your authority for demanding that the submitter of the false returns be penalized.
2.1 You should also do follow-up to ensure that this penalty is instituted. Once their violations of law begin affecting their bottom line, usually the submitters of the false returns will reform their ways.
2.2 If the IRS refused to EQUALLY enforce the law, inform them that a criminal complaint will be filed against the IRS Commissioner for the following:
2.2.1 18 U.S.C. §3: Accessory after the fact. The IRS, by refusing to remedy the situation, becomes an accessory after the fact to fraud and false statement by the submitter of the false information returns.
2.2.2 18 U.S.C. §912: Falsely impersonating an officer [PUBLIC OFFICER] or employee of the United States. The IRS is causing you to be misrepresented as a "public official". The tax in Subtitle A of the I.R.C. is a tax upon a "trade or business", which is defined as "the functions of a public office" in 26 U.S.C. §7701(a)(26). By allowing their records to falsely reflect the fact that you are a "public official", they are causing you to involuntarily and falsely impersonate an officer of the United States government.
2.2.3 18 U.S.C. §1030: Fraud and related activity in connection with computers. The IRS is deliberately and willfully falsifying the records that describe your status and they should be prosecuted.
2.2.4 26 U.S.C. §7207: Fraudulent Returns, Statements, or other documents. The IRS is facilitating the submission and processing of knowingly false information returns, such as IRS forms W-2, 1042S, 1098, and 1099.
If the IRS does not take responsibility to civilly penalize the submitter of the false information returns pursuant to 26 U.S.C. §6702, next you can file a criminal complaint against them with the Department of Justice of the United States pursuant to 28 U.S.C. §2679. Charge as follows:
3.1 Charge the submitter of the information return and the withholding agent with the following
3.1.3 18 U.S.C. §1589: Forced Labor. The private employer, by inducting you illegally into the tax system, is causing you to engage in forced labor for the portion of your compensation that he illegally diverts to the government. 18 U.S.C. §1593 mandates restitution for the slavery be paid to you by the submitter of the fraudulent information return.
3.2 Charge the IRS with the following:
3.2.1 18 U.S.C. §3: Misprision of felony. The IRS is cooperating with the crimes of the information return submitter and withholding agent.
3.2.2 18 U.S.C. §241: Deprivation of Rights. The IRS is causing you to involuntarily forfeit your rights to the fruits of your labor and the compensation from it, by refusing to take action on your petition for redress.
3.2.3 18 U.S.C. §1002: Possession of false papers to defraud the United States. The fraudulent information returns received from the submitter are used in crediting Social Security Earnings, which in turn become a basis for collecting Social Security benefits. If these reports are wrong, then the person who is the subject of the report is entitled to increased Social Security earnings, which in turn can be used to defraud the United States out of monies that they in fact are not legally entitled to. No one domiciled in a state of the Union on other than federal territory can lawfully participate in or collect benefits from Social Security. See
Resignation of Compelled Social Security Trustee, Form #06.002
3.2.4 18 U.S.C. §1028A: Aggravated Identity Theft. The IRS, by using a Social Security Number as a Taxpayer Identification Number, and by falsely associating you with the status of a "public employee", is stealing your identity and transporting it unlawfully to the District of Columbia pursuant to 26 U.S.C. §7701(a)(39) and 26 U.S.C. §7408(d).
3.2.5 18 U.S.C. §1030: Fraud and related activity in relation to computers. The fraudulent information returns received from the submitter by the IRS are processed entirely by computer. By allowing knowingly false information in their computer system, they are engaging in computer fraud.
3.2.6 18 U.S.C. §1583: Enticement into Slavery. The IRS, through the omission of failing to correct the false information return reports or in LYING to you by telling you that they are required, is inducting you illegally into the tax system, is causing you to engage involuntarily in slavery for the portion of your compensation that he illegally diverts to the government.
3.2.7 18 U.S.C. §1589: Forced Labor. The IRS, by refusing to correct the fraud of the information return submitter, is inducting you illegally into the tax system, is causing you to engage in forced labor for the portion of your compensation that he illegally diverts to the government. 18 U.S.C. §1593 mandates restitution for the slavery be paid to you by the IRS.
3.2.8 18 U.S.C. §1951: Interference with commerce by threats or violence. If the IRS threatened to penalize, audit, or "selectively enforce" against you in retaliation for brining the illegal activity of the submitter of the fraudulent information return and withholding agent to their attention, then they are engaging in criminal racketeering.
3.2.9 18 U.S.C. §1956: Laundering of monetary instruments. If the submitter of the false information return also involuntarily withheld monies from your pay, the IRS, in receiving the proceeds of said extortion, is engaging in laundering of monetary instruments.
3.2.10 42 U.S.C. §1994: Peonage abolished. The IRS, by its omission in correcting the fraudulent information returns, is recruiting you into peonage and making you into involuntary surety for debts of a foreign jurisdiction.
If the DOJ does not prosecute the IRS employees engaging in the fraud because of their omission, file a criminal complaint with the Attorney General of your State against the commissioner of the IRS and the specific employees at the IRS who refused to correct the fraudulent information returns. Use the following as a resource:
4.3 28 U.S.C. §2679(c ): Authorizes you to sue a federal employee in a state court if he is operating outside of his delegated or lawful authority.
4.4 28 U.S.C. §1652: State laws as rules of decision. States that state law prevails in cases where federal actors are operating outside their authority on land under exclusive state jurisdiction.
Next, you can file a civil lawsuit as follows:
5.1 26 U.S.C. §7434: Civil Damages for Fraudulent Filing of Information Returns. To recover civil damages for false filing of information returns for $5,000 or more, including attorneys fees, against the submitter of the false information returns.
5.2 31 U.S.C. §3729: False Claims Act. Use this statute and file in the name of the United States to recover false claims against the United States. Since the U.S. Attorney declined to prosecute, then this statute allows you to file suit individually as an agent of the United States.
W-2, 1042-S, 1098, and 1099 reports are called "Information Returns" by the IRS. The IRS and state revenue agencies make it very difficult for you to rebut the bogus W-2, 1099, and 1098 reports by:
Consequently, it is VERY IMPORTANT that you maintain an archive of all of the Information Returns filed on you, along with the rebuttal to each one in the form of either a 4852, an amended W-2, etc. That way, when the IRS institutes collection activity, you can include rebutted versions of the Information Returns with your response, and you can reuse these rebuttals in all future correspondence with a minimum of effort.
For those of you who are trying to reconstruct a file of all of your Information Returns so you can prepare rebuttals and keep them on file for future use, the following options are available:
Topic 159 - Prior Year(s) Form W-2 (How to Get a Copy of) (OFFSITE LINK)
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