Janitor Bob Posted February 23, 2015 Report Share Posted February 23, 2015 Long-time client arrived much earlier than usual this year...excited to get his part of the billions back. Graduated college 2-years ago. Pretty decent job right out of college...nice young kid with a smile on his face...just sure that he has a decent refund coming his way. Just from his W-2s, I would agree. claiming zero exemptions and having extra Fed tax withheld from each pay is a good start if you're wanting a refund.....but then I come across the 1099-C for cancelled student loan debt....$54,000. Ouch...goodbye refund, hello installment agreement. 6 Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted February 23, 2015 Report Share Posted February 23, 2015 Long-time client arrived much earlier than usual this year...excited to get his part of the billions back. Graduated college 2-years ago. Pretty decent job right out of college...nice young kid with a smile on his face...just sure that he has a decent refund coming his way. Just from his W-2s, I would agree. claiming zero exemptions and having extra Fed tax withheld from each pay is a good start if you're wanting a refund.....but then I come across the 1099-C for cancelled student loan debt....$54,000. Ouch...goodbye refund, hello installment agreement. If it was cancelled student loan debt, there is NO method available to exempt it from income. I have played that game with a client as well. Not even insolvency will work. 1 Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted February 23, 2015 Report Share Posted February 23, 2015 Not on student loans. Good bye refund and then some. Quote Link to comment Share on other sites More sharing options...
RitaB Posted February 23, 2015 Report Share Posted February 23, 2015 Hey, JB, tell him he got $54,000 in tuition and stuff that RitaB's kids did not get. Plus RitaB paid SE tax on her $54,000 that is gone. Maybe that will help. Here I am judging again. Sorry. Nah, not really. And how does that happen, that his student loan debt is cancelled two years out of school? Was I so mad about ObamaCare that I missed that one? 7 Quote Link to comment Share on other sites More sharing options...
Lee B Posted February 23, 2015 Report Share Posted February 23, 2015 Hey, JB, tell him he got $54,000 in tuition and stuff that RitaB's kids did not get. Plus RitaB paid SE tax on her $54,000 that is gone. Maybe that will help. Here I am judging again. Sorry. Nah, not really. And how does that happen, that his student loan debt is cancelled two years out of school? Was I so mad about ObamaCare that I missed that one? Exactly, how the heck did he get his student loan debt cancelled. There are people in their 60 s starting to draw SS, ending up with their SS benefits garnished for old student loan debt. 3 Quote Link to comment Share on other sites More sharing options...
Cathy Posted February 23, 2015 Report Share Posted February 23, 2015 JB, I'm sure you've probably already have questioned the client as to why the student loan was cancelled. I have had in the past at least one student loan cancelled that wasn't taxable. So it isn't an automatic issue. Quote Link to comment Share on other sites More sharing options...
jklcpa Posted February 23, 2015 Report Share Posted February 23, 2015 I was wondering too. There are student loans that are cancelled if the person works in a certain occupation for a period of time after graduation, but I don't believe the person would receive a 1099-C in those cases. Do tell, what's going on? Quote Link to comment Share on other sites More sharing options...
Janitor Bob Posted February 23, 2015 Author Report Share Posted February 23, 2015 I was wondering the same thing! I do not feel sorry for him....My daughter just graduated college with $39,000 in debt....She will be struggling for many years to pay that off. It was a private student loan through JP Morgan Chase bank. He told me that he informed the bank that he could not make their requested monthly payment. Apparently, the bank refused to lower the monthly payment, so he just stopped paying and told the bank where to stick their loan. Not a bad deal (aside from the effect on his credit)....owe IRS approx. $5,400, but walk away with no debt. 2 Quote Link to comment Share on other sites More sharing options...
ILLMAS Posted February 23, 2015 Report Share Posted February 23, 2015 This might be a dumb question, but how the hell did he manage to get rid of the student loans? I had an understanding that not even in bankruptcy you could get rid of your student loans. Quote Link to comment Share on other sites More sharing options...
Janitor Bob Posted February 23, 2015 Author Report Share Posted February 23, 2015 I'm guessing that subsidized loans through the Federal government are probably never forgiven...but they also have much more flexible payment plans. I can only surmise that student loans through private banks (not subsidized by Feds) can be forgiven at the discretion of the bank...much like they would credit card debt. I imagine that Chase looked at this kids income and decided that is was financially more advantageous to write it off. I think they would have gotten much more out of him had they been willing to re-structure or negotiate a lower payment and extend the life of the loan. the kid was willing to pay...had a decent job...but with income of $28,000 annual, I can see why he could not afford their $400/month payment. He told me he offered to pay $200.00/month, but the bank said no...either you pay $400.00/month or you default. 1 Quote Link to comment Share on other sites More sharing options...
Catherine Posted February 23, 2015 Report Share Posted February 23, 2015 <snip> He told me he offered to pay $200.00/month, but the bank said no...either you pay $400.00/month or you default. Banks can be stupid like that. We can't be bothered to do the paperwork, so we won't get our (depositors') money back. Quote Link to comment Share on other sites More sharing options...
TAXMAN Posted February 24, 2015 Report Share Posted February 24, 2015 Is my thinking right that bankruptcy and insolvency will NOT wipe out this kind of 1099-c? Quote Link to comment Share on other sites More sharing options...
Richcpaman Posted February 24, 2015 Report Share Posted February 24, 2015 JB: If he didn't skip out of your office... $5,400 in tax instead of $54,000 in debt at $400/month for 20 years.... Yes. He should be skipping. That is a definite WIN on his part. Who cares about $1,000 of those HRB *billions*... That is a windfall of about 75k! Rich 7 Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted February 24, 2015 Report Share Posted February 24, 2015 A win, except for the effect on his credit. Still, that will drop off after 7 years. 1 Quote Link to comment Share on other sites More sharing options...
HV Ken Posted February 24, 2015 Report Share Posted February 24, 2015 Isn't free college what the current administration is pushing for? (tic) 2 Quote Link to comment Share on other sites More sharing options...
Cathy Posted February 25, 2015 Report Share Posted February 25, 2015 (edited) I have a feeling that your client's refund would have been kept by IRS because of the default on the student loan. The bank may consider it a discharged debt, however, the government who was the guarantor probably wants to recover the money they had to pay to the bank. His default on his student loan will more than likely haunt him for years. Edited to add: If IRS would have overlooked keeping his refund this year, that's not to say they would start confiscating it next year. Edited February 25, 2015 by Cathy Quote Link to comment Share on other sites More sharing options...
mrichman333 Posted February 25, 2015 Report Share Posted February 25, 2015 Just makes me sick. I paid 100% for my education, went part time. I applied for no aid. WHAT WAS I THINKING! Maybe that my fellow citizens are not responsible for my higher education 7 Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted February 25, 2015 Report Share Posted February 25, 2015 Just makes me sick. I paid 100% for my education, went part time. I applied for no aid. WHAT WAS I THINKING! Maybe that my fellow citizens are not responsible for my higher education DITTO!!! I guess we took the wrong path having ethics, morals and a sense of responsibility for ourselves. It also appears that we are quickly becoming the minority in America. 4 Quote Link to comment Share on other sites More sharing options...
RitaB Posted February 25, 2015 Report Share Posted February 25, 2015 Just makes me sick. I paid 100% for my education, went part time. I applied for no aid. WHAT WAS I THINKING! Maybe that my fellow citizens are not responsible for my higher education Absolutely. I worked summers as a waitress back in the 80s and paid for college that way. It was doable, too. Tuition is ridiculous now because of all the easy money we throw at everybody. So the price goes up. Of course it does. Paying for three to go has been tough. And, it makes my kids sick, too, to see some of their friends MAKE money on grants. 5 Quote Link to comment Share on other sites More sharing options...
JohnH Posted February 25, 2015 Report Share Posted February 25, 2015 Back in 1970-74 I was fresh out of the Air Force, my wife and I were attending college, and I was working a part time job to help support us and our newborn baby. Between the GI bill, my part-time work, and lots college loans we scraped by. My brother-in-law who worked for Social Services kept telling me we qualified for food stamps, and that "everybody was doing it". I kept refusing to apply because our financial difficulties were a result of lifestyle decisions we made to get an education in anticipation of a better future. I felt that food stamps and other welfare programs should go to the truly needy.It took us 15 years to pay off some of the college loans - just in time to go another round of loans when our daughter went to college. If I had it to do all over, I wouldn't do anything differently, but I realize we were (and still are) chumps in terms of what our culture embraces today. 7 Quote Link to comment Share on other sites More sharing options...
Janitor Bob Posted February 25, 2015 Author Report Share Posted February 25, 2015 I also worked through college and paid back student loans for nearly 15 years after graduating. Not paying them was never an option. I borrowed the money and paying it back was the legally and socially/morally the right thing to do. I'm proud to say that I have instilled that same sense of honor and moral character in my daughter who has started repaying her student loans. Don't get me wrong...I'm not saying that this kid/client had a choice...from what he is telling me, the bank was not willing to work with him at all..but it bothers me that he thinks he should be able to walk away from the debt without suffering at all. This sense of entitlement that is common in the younger generation is worrisome. 7 Quote Link to comment Share on other sites More sharing options...
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