Can IRS ask you how you paid your mortgage when you didn't file a return?

I got a notice 746 from IRS asking me how I paid my mortgage in a year I didn't file. I actually wasn't working and lived off a cash out refinance. Can I ignore letter, can they ask this?? Will they pursue this?Can IRS ask you how you paid your mortgage when you didn't file a return?
sure they can ask, and sure you don't have to answer. But don't be surprised then if they decide to audit you to see if you are underreporting your income. Better to explain to them exactly what you have said in your question, that you weren't working and lived off a cash out refinance.Can IRS ask you how you paid your mortgage when you didn't file a return?
This is a type of audit you are having. Send in documentation showing the cash out refinance and any other documents that establish that you lived off of nontaxable money.





If they are not satisfied, they will pursue further investigation of how you managed to pay your bills and not have any taxable income. They will look at your bank deposits. If there are deposits that didn't come from the refi they will want to know where that money came from.
Never ignore a letter from the IRS - you'll only cause yourself trouble down the road. And yes, once they have asked, they WILL pursue it, won't just forget about it.





Yes, they have the right to ask. And if you have a valid answer, and it sounds like you do, then give them the answer. They might ask for proof of the cash out refi, but that should close the issue.
Yes, they can ask that question. Your answer is acceptable and if it's true you will not trigger any tax consequences by answering it truthfully.





If you ignore the letter, the IRS will likely estimate your income based upon the information that they do have available, i.e. the mortgage interest statement (Form 1098) that they have a copy of. They'll use the average income reported by people reporting similar mortgage interest amounts on Schedule A and assess tax based upon that income, plus penalties and interest.





If you do not answer the question, the IRS will almost certanily pursue the issue!





It is NEVER wise to ignore a letter from the IRS, no matter how odd or outrageous the request may seem.
I would answer it simply with the answer you provided us. They can ask %26amp; they can pursue.
No you cannot ignore this. However, your explanation is perfectly logical. Should they require documentation, you can show them the paper trail, and it will all go away.
Unless you want the pain and suffering of an audit down the road, you'd better answer the letter. The IRS (or any branch of the government, for that matter) can make your life hell if you don't cooperate. Trust me - I've been audited by the IRS, and it wasn't pleasant. Avoid it at all costs!
The IRS can ask a lot of things and the worst thing you can do it ignore the letter.





I once didn't file because I had been out of work all year and, like you, I lived off of savings (as well as taking in a roommate to share the living expenses.) You'll likely need to be able to document the cash-out refinance. Respond to their letter in whatever way they've requested and under no circumstances do you want to miss the deadline they've given you to respond.