February 7, 2019
I have been approved for a 0 IBR payment for the last few years. I am married but file separately, I have little to no income of my own. We amend our taxes after 2 years to gain the credits we lost previously from filing separately. This has worked out fine every year, my spouse would get a small refund and then a larger one once we amended.
When we attempted to file his taxes separately this year he would owe $5K or we can file jointly and receive $1500 refund. This change is due to changes in the tax laws and not being able to itemize many deductions.
This is also the time of year for me to recertify my loans.
My tax accountant has advised me to just complete the IBR form stating that we have separated and that way I am not required to share the joint return.
If this is something I can do?
Does it make sense to complete the ibr form first or file for taxes first?
Is there another way to reduce tax liability and keep the 0 IBR payments?
May 3, 2014
First the short answer to your question: When IBR payments are calculated, it will be based upon your most recent tax return. If you haven’t filed your 2018 tax return, they will use the numbers form your 2017 tax return.
Now for the slightly longer answer: The strategies your accountant has you using are very interesting. Both approaches seem to be designed to skirt the rules. The system appears to have been designed so that borrowers are put in a position where they have to accept a higher tax bill or higher student loan payments. Your accountant appears to have found a way around this. Peronally, I am very conservative when it comes to tax filing etc., and I genuinley don’t know the best approach based upon the information you have presented.
What I would like to do is to reach out to some fellow attorneys who have litigated many student loan cases. I’d like to get their feedback as to what is smart, what is quesitonable, and what shouldn’t be done. Within the next couple of weeks, I’ll get an article posted that will have input from several student loan attorneys. Hopefully that will be helpful for yourself and others.
I would be very interested in reading that article. My spouse and I have filed separately in the past and I am wondering whether we can amend to obtain the tax benefits or whether this is risky. Seems fine from the IRS perspective but could the loan servicer recalculate past years’ paymentsor could it affect the ability to get remaining balance discharged under IBR after 25 years?
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