About Real Estate: Which housing records can be tossed now?
There's no reason to hoard all of your past housing-related documents, but some should be kept until you eventually sell.
Q. We have owned our home for 13 years, and have kept all of our mortgage and bank statements, utility and insurance bills and the like from the day we first moved in just in case we ever get audited by the Internal Revenue Service. Not surprisingly, our basement and den are now full of boxes filled with the old records, and the clutter has become unbearable. Can we throw any of this stuff out?
A. You can toss a lot of that old paperwork now, but other parts of it you will need to keep forever — or at least until you and your spouse sell the house.
Unless it suspects fraud, the IRS generally cannot launch an audit more than three years after an individual tax return is filed (though the cutoff is six years for most of those who own their own business).
Nonetheless, it's best to keep copies of your annual returns forever. Lenders will want to see your most recent ones if you want to buy a new house or refinance an existing loan, while older duplicates will help if you get into a beef with the IRS soon or with the Social Security Administration over past earnings when you file for benefits later.
Keep the final settlement statement you received when you first purchased the house until you eventually sell. Ditto for receipts and canceled checks for any home improvements you have made: The IRS allows the cost of most remodeling projects to be added to the "adjusted cost basis" of the original purchase price of a home, which could save tens of thousands of dollars in taxes you may owe on any profits when you sell.
If you take the home-office deduction, you also will need to keep copies of utility bills and the like for at least three years to defend against a possible audit. Otherwise, the bills can be tossed now.
Past monthly mortgage statements and most other documents that are piling up in your home can also be thrown out now. It would be best to cut them up or put them through an automatic shredder, though, because many such documents contain account numbers or other types of personal information that a clever thief could use to steal your identity and then take out a loan or other credit in your name.
Q. Is it true that part of President Barack Obama's latest housing bailout plan allows borrowers to skip their next mortgage payment, in part to honor President's Day?
A. No, it's absolutely false. This ridiculous rumor spread like wildfire across the Internet in early February, but homeowners who foolishly fall for the ruse and don't make their upcoming payment will face stiff late-payment penalties and other fees from their lenders, a big hit to their credit scores, and possibly even be taking the first step toward foreclosure.
I don't know if this wild Internet rumor was started by someone who simply misunderstood the details of Obama's latest plan, or by some sick prankster bent on financially harming as many homeowners as possible. Either way, it is 100 percent false.
Presidents George Washington and Abraham Lincoln probably would be spinning in their graves if they knew that the day our nation created to honor them is now part of such a potentially ruinous rumor. But then again, they probably wouldn't be too happy to find out that their holiday, initially designed to recognize their achievements, has largely devolved into just another marketing tool for retailers to offer half-off sales on everything from furniture and mattresses to tires and toys.
Q. I am applying for a mortgage, and the lender's loan officer wants a copy of my divorce papers before he can approve the loan. But my ex took all of the paperwork when she moved out five years ago and is nowhere to be found, while my divorce attorney's office closed up after he died in 2009. What can I do?
A. All divorce papers must be approved by a judge or other representative of the court, so start the hunt for the missing papers by calling the court where the divorce was finalized or the county clerk where the decree was likely recorded. Your state's department of records also may have a copy of the decree on file, but it's usually faster to get results by working through the county rather than dealing with the state's larger bureaucracy.
• For the booklet "Straight Talk About Living Trusts," send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 2960, Culver City, CA 90231-2960.
© 2011, Cowles Syndicate Inc.
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