Help with Form 886-A for Schedule A Mortgage Interest & Schedule D Basis of Property issues

This Form 886-A is basically the IRS asking for supporting documentation to back up deductions or basis claims you made on your return. Let me address both issues: For the Schedule A Mortgage Interest, you need to provide: 1. Form 1098 from your mortgage lender showing the interest paid 2. Proof that YOU paid it - bank statements or canceled checks showing the payments came from your account 3. If the mortgage is not solely in your name, documentation showing your legal obligation to pay For the Schedule D stock basis issue, since these were inherited stocks, you need: 1. Documentation showing the fair market value on the date of death (this becomes your basis for inherited assets) 2. The date you inherited the stocks 3. Any appraisals or valuations done for estate purposes 4. Statements showing the original purchase if you have them The key with Form 886-A responses is to be thorough and organized. Label each document clearly and write a brief explanation of how it addresses their specific concerns.

I just went through a similar nightmare with Form 886-A questions about my mortgage interest and investment sales. After spending weeks gathering documents and getting nowhere, I finally used https://taxr.ai to help analyze my mortgage statements and investment documents. Their system identified exactly what the IRS was looking for - basically the connection between my bank statements and the 1098 form that I hadn't properly documented. For the stock basis issue, they helped me understand that for inherited stocks, the IRS was looking for documentation of the stepped-up basis. Their document review highlighted that my broker statements weren't clearly showing the acquisition date and method. Once I knew what was missing, I was able to get the right documentation from my financial advisor.

I wanted to follow up about my experience with taxr.ai after trying it based on the recommendation here. I was initially skeptical, but I decided to give it a shot with my Form 886-A issue regarding some rental property expenses the IRS was questioning. I uploaded my documents and the 886-A form, and the system quickly identified that I was missing proper substantiation for the timing of certain repairs versus improvements. The analysis pointed out exactly which receipts needed better documentation and explanation to satisfy the IRS requirements. What impressed me was how it caught a categorization error I had made between repairs (immediately deductible) and capital improvements (which need to be depreciated). I submitted the reorganized documentation with the explanations suggested, and the IRS accepted my response without further questions! Definitely saved me from having to pay an additional $2,800 in disputed deductions. Sorry for doubting you!

If you're dealing with a Form 886-A and getting frustrated trying to reach the IRS for clarification, I strongly recommend using https://claimyr.com to get through to an actual IRS agent. I tried for WEEKS to get specific guidance on what documentation would satisfy my 886-A inquiry about business expense substantiation, but kept hitting automated systems and 2+ hour hold times. Claimyr got me connected to an IRS representative in about 15 minutes when I had been unable to get through for days. The agent walked me through exactly what they were looking for with my Form 886-A response. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. Being able to ask specific questions about what documentation would be sufficient saved me from sending inadequate records and extending this whole audit process.

I have to admit I was completely wrong about Claimyr. After responding skeptically here, I was desperate enough to try it for my Schedule D basis documentation issue. I had been trying to call the IRS for THREE WEEKS. Using the service, I got a call back in 35 minutes connecting me with an actual IRS agent in the examinations department. The agent explained that for my inherited stocks, I needed to provide: 1) the official date of death valuation from the executor, 2) documentation showing I was the beneficiary, and 3) the acquisition date when the shares were transferred to my name. The agent also told me I could request a specific form from my brokerage that would satisfy their requirements - something I never would have known without speaking to someone directly. I submitted everything last week and just got confirmation that my documentation was accepted! Saved me approximately $5,600 in disputed capital gains tax. Completely worth it after weeks of frustration.

For the Schedule A mortgage interest question, I had a similar issue when I refinanced with a private lender who didn't provide a standard Form 1098. Make sure you're providing evidence of both the interest AMOUNT and that YOU were the one who paid it. For my case, I created a simple spreadsheet showing each payment, how much went to principal vs. interest, and then highlighted the corresponding bank statement entries showing the money coming from my account. The IRS accepted this as proof. Just make sure you're very organized and everything matches exactly to the penny.

For the Schedule D basis issue, I went through this exact problem with inherited stock. The IRS wants to see that you're using the stepped-up basis (fair market value at date of death) rather than the original purchase price. I couldn't find the exact valuations from when my father passed away, so I contacted the transfer agent for the stocks and requested historical pricing for the specific date of death. Most companies will provide this if you explain it's for tax purposes. Then I created a simple document showing: 1. Stock name and ticker symbol 2. Number of shares inherited 3. Date of death 4. Price per share on that date 5. Total basis (price × shares) The IRS accepted this without issue.

I'm surprised nobody mentioned getting professional help for Form 886-A responses. These are essentially audit inquiries and responding incorrectly can lead to bigger problems. When I received one questioning my home office deduction and some Schedule C expenses, I tried handling it myself first and made things worse. A tax professional who specializes in audit representation knows exactly what documentation the IRS is looking for and how to present it effectively. They typically charge $300-500 for Form 886-A assistance, but that's tiny compared to the potential additional taxes, interest and penalties if your deductions are disallowed.

I just wanted to add some perspective as someone who's been through multiple Form 886-A responses over the years. The key thing to remember is that this is NOT an audit - it's a documentation request. The IRS is essentially saying "prove what you claimed on your return." For your mortgage interest issue, the IRS wants to establish two things: (1) that the payments were actually mortgage interest (not principal, fees, or other costs), and (2) that YOU were legally obligated to pay and actually did pay them. If you have a joint mortgage but file separately, this becomes more complex. For inherited stocks, the stepped-up basis rule is in your favor - you get the fair market value on the date of death as your basis, not what the deceased originally paid. But you need to document that value. Even if you can't find estate documents, you can often reconstruct this using historical stock prices from financial websites like Yahoo Finance or requesting records from the company's transfer agent. The most important advice: respond within the deadline (usually 30 days), be thorough but concise, and organize everything clearly. Label each document and explain how it addresses their specific concern. If you need more time, call the contact number on the form to request an extension - they're usually reasonable about this. Don't panic - Form 886-A responses have a high success rate when you provide proper documentation. The IRS isn't trying to "get you" - they just need to verify the information on your return.