Post Content

Banker & Tradesman (subscription only) ran a story this week on the subject of mortgage loan originators subject to DOR audits. The story also discussed how DOR generates taxpayer audits in general.

The piece was pegged to a notice from the Massachusetts Mortgage Bankers Association urging loan originators to “consult with your tax accountant or adviser” to best preserve the deductibility of appropriate unreimbursed business expenses for outside sales people. By the way, it is the IRS that defines what are acceptable unreimbursed expenses.

The story posed the question: Was DOR singling out mortgage loan originators for special attention? The answer, as reported in Banker & Tradesman, and we’ll repeat it here, is simply, “no.”

DOR uses a program called Discover Tax to review information on tax returns against many different kinds of databases. If, for example, a tax return reports relatively low income, but the taxpayer owns a $1 million home and two Bentleys, Discover Tax will flag that incongruity and generate an audit. DOR has no idea what type of employment or employer the taxpayer has; it’s the numbers that jump out.

Similarly, if a taxpayer has an unusual amount of unreimbursed business expenses relative to income, Discover Tax will recognize that and kick out an audit.

Any individual taxpayer — including mortgage loan originators — may encounter a problem if they claim unreimbursed business expenses on the same basis as afforded to outside salesman.

DOR’s view, articulated in 1989 and maintained since then, is that outside salesman sell for their employer outside the employer's office. Thus, a mortgage loan originator who works in an office is not an outside sales person.

If mortgage loan originators claim unreimbursed business expenses in amounts that  bubble up to an audit after a Discover Tax run, they face the question not only of justifying and documenting the expenses, but they must also make sure of their legitimate claim to them in the first place.  

Written By:

Recent Posts

DOR Announces Updates to Offer in Compromise Program posted on Jan 10

The Massachusetts Department of Revenue (DOR) has updated its Offer in Compromise (Offer) program to streamline the process and incorporate best practices. Offer overview An Offer is an agreement between the taxpayer and DOR to settle a tax liability for less than the full amount   …Continue Reading DOR Announces Updates to Offer in Compromise Program

In Case You Missed It… posted on Dec 14

In Case You Missed It...

“If it isn’t on YouTube, it might as well have never happened.”- Gordon Korman Videos, Videos, Videos! In our What’s New at DOR update we highlighted our MassTaxConnect video tutorials as well as four videos to guide you through 2022’s filing season. Since the tutorials launched, we provided both English and Spanish subtitles for every video. Subscribe to DOR’s YouTube channel to   …Continue Reading In Case You Missed It…

Jobs! Jobs! Jobs! posted on Dec 13

Jobs! Jobs! Jobs!

Opportunities for employment abound here at the Massachusetts Department of Revenue. We are currently hiring for some of our key teams like the Fraud Unit, Tax, the Contact Center and the Collections Unit. What makes us stand out in the job market these days? Two   …Continue Reading Jobs! Jobs! Jobs!