Cannot Prove Residence

Today TaxMama® hears from Johnathan in the TaxQuips Forum, with a good question.  Let me summarize. “Although I have lived in my home for more than two years, I don’t have proof of that. My voter registration, driver’s license and banking all show a friend’s address. What kind of penalties will I face if the IRS disallows my personal residence exclusion when I sell my house this year?”

Dear Jonathan,  

Sigh…this IS going to be a problem. And it’s the kind of thing that affects many people.

Let’s look at other proofs of residence, shall we? Does your state have a homeowner’s credit on the property tax? Did you claim it?

Is your name on the utility bills? Was a tenant’s name on the utility bills during that time? Do the utility bills show actual usage of utilities – or just the bare minimum charges?

Your credit cards generally ask for a street address, even if you use PO Boxes, etc. Did you use your home address? Or your friend’s? Did you get involved in any local groups, clubs, religious organizations? Do you know any neighbors who can testify that you lived there? You may be able to get them to sign a sworn, notarized affidavit.

Be creative and look at ways to prove you lived there.

If you claim the personal residence exclusion and lose it? You will have to pay taxes on the gain on the sale of the house – after you deduct all the commissions and selling costs. (Will the profit really be all that high?)

The good news is, since you have owed the house for more than 1 year and 1 day,

you will face long-term capital gain rates. Probably no higher than 15% unless you’re in a really high tax bracket.

I doubt that you would face fraud penalties. IRS looks at good faith and sincerity.

But, this is a good lesson for others to learn. When you buy a residence – update all your registrations (DMV, driving license, voters, etc.)

I hope this works out for you.

And remember, you can find answers to all kinds of questions selling your home and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

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4 thoughts on “Cannot Prove Residence

  1. TaxMama says:

    Good point, Linda.

    Living across the street from a school – and working from home – we have everything going to a PO Box, too. But we are claiming the homeowner’s exclusion. You can see a LOT of utility usage. And we’ve had audits conducted on the premises…

    I have staff that comes here, who could probably attest that we live here (or will have lived here) when and if we sell the place. But, that’s a thought. When we do sell, it might not hurt to get that verification in writing before moving away and losing touch. Hmmm…

  2. Linda Dorfmont says:

    I had the same problem when trying to open a bank account. Everything has gone to a P.O. box including my driver’s license for over 20 years. Mail delivered to the building, if it isn’t stolen, is dumped in the trash. (&(&*! Patriot Act.

  3. TaxMama says:

    Thanks for the tip, MTO,

    Even landlords pay the property taxes.

    However, the property tax bill will show if they have claimed a homeowner’s exemption.
    That is, if their state or locality makes that an option.
    Here, in CA, it does appear on the property tax bill.

    Hugs
    Eva

  4. mtocpa says:

    If you own the home then you are responsible for the property taxes. Get a copy of your property tax bill or receipt and that should add credibility to your claim the home is your personal residence.

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