Receipts? Check ‘em, Then Toss ‘em
Q: I have become a pack rat about saving credit card and ATM transaction receipts. Is there any reason to keep these slips if I find no discrepancies with my credit card and bank statements? Is there a time limit in which a credit card or bank statement can be disputed?-- V.C .
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A: If you do not find any discrepancies between your transaction receipts and your credit card and bank statements, there are few reasons to save these slips of paper. After all, can you think of any reason the amounts would change after their first and only posting to your account? Of course, you will want to save bank and credit card statements after you have verified them, but the individual transaction receipts can be discarded as soon as you are satisfied that they have served their purpose.
Taxpayers used to save credit card slips to document the sales tax deduction on income tax returns, but this deduction was long ago eliminated. You might want to save charge slips if you use your credit card to make charitable contributions or other deductible payments--for medical expenses, child care or miscellaneous business charges. But unless they are needed to verify a deduction, you really have no reason to hold on to those receipts.
Bankruptcy Rules on Pension Funds
Q: I am having severe financial difficulties and face foreclosure on my home and a potential bankruptcy filing. If we do end up in bankruptcy, can our creditors and the Internal Revenue Service go after my individual retirement account and other pension savings to satisfy our debts?-- M.R.Q .
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A: Your IRA, Keogh or other pension accounts cannot be touched by creditors in a bankruptcy proceeding. If you emerge from bankruptcy without satisfying tax obligations (or making provisions to satisfy them in the future), the IRS could go after your retirement accounts.
Whether the IRS will actually seek to attach your pension assets to cover back taxes cannot be known with absolute precision. The agency is empowered to attach pension assets, but in practice it prefers to keep taxpayers from becoming impoverished in their old age. Experts say you would be wise to settle any debt to the government during the bankruptcy proceeding, either by paying all you owe or by making what is called an offer in compromise, in which you agree to pay a negotiated amount of the debt over time.
Credit Card Bills as Debt of Estate
Q: My husband died leaving no estate from which to pay off a few thousand dollars in credit card bills. The cards were in his own name; I did not sign the applications. He was the only card user and paid on the accounts monthly from his own income. Am I liable for his outstanding debt?-- J.R .
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A: Your obligation depends on whether the credit card issuer knew your husband was married and whether the creditor depended on your husband’s community property assets to cover the debts accumulated on the card. This is generally known as the “intention of the creditor” test.
Here’s how it would be applied in your case: Did your husband indicate on his credit card application that he was married? Most cards have such a question. If he marked “yes,” then the creditor can be said to have intended that the debts accumulated on the card would be the community property of the husband and wife, making you obligated for the debts he left at death. The only exception would occur if your husband, while noting that he was married, indicated that the debts on the card were not community property. Absent such a direct declaration, the debts are presumed to be community property.
Principal Residence Replacement Costs
Q: My wife and I started construction of a home in March. We expect it to be completed by the end of the year. We began paying for the lot in 1991. When we sell our present home and move into this replacement residence, what portion of the costs will count toward purchase of a replacement residence? What constitutes completion of construction of the replacement residence?-- D.F .
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A: Costs incurred within 24 months of the sale of the original residence--that is, 24 months after and before--count toward the cost of a replacement residence. For your entire construction costs to count, you must sell your present residence by March, 1996. Any costs paid within 24 months before the sale will count as well--but anything paid before that point will not count.
Generally speaking, a certificate of occupancy should satisfy the IRS that the new home is your replacement residence. However, let’s be clear that the IRS intends for you to be living in the home as well.
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Carla Lazzareschi cannot answer mail individually but will respond in this column to financial questions of general interest. Please do not telephone. Write to Money Talk, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053
