Cancellation of Debt / Student Loans / Tax Chaos

[tired_teacher]

GOD bless,

My student loans were dismissed this year due to my SSD approval. It is my understanding the $28K dismissal can be counted now as income on my taxes. Like everyone else here, we need all the money we can get for medical expenses.

My question for you is because my loans were dismissed due to a permanent illness is there any way around this big tax nightmare--this is money we cannot pay.

Thank you and everyone else for taking time to read my question.

Melissa

[thelegendlc]

Tax on loan forgiveness

Last year I paid tax on a little over $13,000 for a student loan that had been forgiven by the government. I am receiving SSDI payments. I doubt that you will find any way around it. It's better to be required to pay tax on the amount forgiven than continue to make payments on the full loan amount.

[palmtree]

Itemize deductions. If you don't enjoy reading through IRS publications, get a good tax preparer who will help you find all things you can deduct. Doctors, prescriptions, transportation and parking, Medicare insurance premiums and many other expenses associated with your illness are deductible. Then you can deduct your car license fee and sales tax paid. Then, charitable donations. If you have a house the mortgage interest is deductible.

I'm not suggesting you do anything dishonest but a little padding won't get you into trouble. I'm sure I will be criticized for saying this but people with MS need all the help they can get.

The good news is that your SSDI will likely not be taxable.

CONGRATULATIONS FOR GETTING YOUR STUDENT LOANS DISMISSED!

[tired_teacher]

Thanks

Thank you for taking the time to answer my question. Can we make payments to the IRS? Is there an interest rate? How long will they usually give to pay back 6k.

We do itemize--like everyone else, we MS folks struggle to pay all kinds of bills.

I guess we need to swallow it and do the best we can, but do you all ever get tired of doing the best you can?

GOD bless.

[palmtree]

Did you send your return in already? If not, add some more items to your itemized deductions. At least $15,000 for medical, $1800 for charity...now is not the time to be Mother Teressa.

You can negotiate a payment plan with them. They charge interest but it is not real high. $6K? That is so much.

Good luck. If there is anything I can do to help, let me know.

[hdwhit753]

Bad advice

I'm not suggesting you do anything dishonest but a little padding won't get you into trouble. I'm sure I will be criticized for saying this but people with MS need all the help they can get.

Yes, you will get criticized for it because you're telling someone to use their MS as an excuse to lie and cheat.

"Padding" CAN get you into trouble.

Claim every deduction and credit you are legitimately entitled to, but nothing more. If you can't pay your bill in full, go ahead and file the return with only a partial payment. The IRS knows that cancellation of debt creates a tax problem for people.

The Collections people will push you to take out a private loan to get the money because it may have a lower interest rate than the government charges, but they will put you on a payment plan if you ask.

If you are having trouble making your payment, contact them before you miss a payment. They will work with you (they'll be stern, but they will work with you). The people who end up with "tax nightmares" are the ones who think they can just ignore IRS.

[palmtree]

Lecture finished?



Let's not turn this helpful thread into a discussion between members who disagree. No one will win such a discussion. MSWorld guidelines state: "1. INTERNET ETIQUETTE: Show respect for others at all times.

[palmtree]

[QUOTE=hdwhit753;1442548]Yes, you will get criticized for it because you're telling someone to use their MS as an excuse to lie and cheat.

This was the part of your post that was unwelcome and unnecessary. What you should have said is, "I don't agree because..."

I gave her that 'bad advice' because many people don't realize how many legitimate deductions they have and end up paying money to the IRS that they can't afford. It's very hard to amend a tax return once it's filed especially if you paid too much.

My intent was entirely to help her because she is in a very tough situation. I am not a tax evader nor a criminal. I simply believe that morality is not black and white. Caring for a disabled person to me carries a higher moral value than minuscule amounts of the US Treasury.

The rest of your advice was sound about the importance of communicating with the IRS and sending in regular payments.

[Rich Feingold]

Good morning everyone. Yes, we all must be respectful of each other. This forum is not for giving tax advice. Please consult your tax advisor regarding your specific situation, e.g., itemized deductions. Best of luck.

Rich