Ok so last year we refinanced our house at the end of August, just in time when the next property tax bill was coming due. So i got my (2) 1098s, one from my old mortgage company for Jan-Aug, and second one from my current mortgage company Sep-Dec. On the first 1098 from my old mortgage company they reflect the correct amount paid by them for property taxes, however on my second 1098 from my current mortgage company the amount is wrong, they didn't include the first payment (making it off by 25%). I did check the county assessors website to get the correct amount, so which one do i report? Does IRS know which amount is correct and how much was actually paid, even if my current mortgage company screwed up on the 1098?
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You will want to go with the county assessor's office figure. It doesn't matter if your lender(s) made a mistake(s) on your Form 1098, or not. What truly matters is how much you actually paid in property taxes during the last calendar year. That is the root source of you real estate property tax deduction, after all.
The IRS will only know what your lender(s) have sent to the government via the Form 1098. But you will have, presumably, your own payment records in the guise of bank statements and / or a printout of your account from the county assessor's office (which you can get in many jurisdictions directly over the internet). That will constitute your "proof" if you are ever asked to justify your property taxes paid deduction.
By way of comparison, for those property owners who receive property tax bills directly from the county (and who don't have or pay their property taxes through their lender), these folks never have their property taxes reported to the IRS via Form 1098 at all . . . so in many instances the IRS has no information on property taxes paid.
Our tax code in the United States functions mostly on the honor system, but with compliance checks. One of those compliance checks is in the form of occasional taxpayer audits. Tax penalties for noncompliance can be harsh. However, if you keep good records, and claim accurate income + deductions, then you have absolutely nothing to worry about.
To return to your original question, you should go with the yearly total of your actual property tax payments, as long as you can prove them, even if this differs from the amounts shown on your Form 1098(s).
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