Category

individual

Category

Student loan debt is simply a part of college life now. With college tuition skyrocketing as wages stagnate, more and more people are turning to student loans to get an education. But that doesn’t stop the bill eventually coming due, which is burying people under student loan debt for decades. Many people simply don’t understand how student loan repayment really works and what their options are when things go wrong.

Student loan repayment and debt

Joining Kelly this week is Jay Fleischman, a lawyer who has been helping people with debt problems, especially student loan repayment. Jay created the Student Loan Law Workshop, a place where attorneys can learn how to help clients with their student loan debt. Kelly and Jay talk about the impact of student loan debt, when you should seek help from a lawyer or tax professional, and what options you might have when you can’t pay your student loans.

Listen to Kelly and Jay talk about student loan repayment:

  • The percentage of people who take out student loans and their average debt
  • The total United States student loan debt
  • The difference between private student loan debt and federal student loans
  • The rising average college tuition costs
  • The common myths about college tuition and student loan debt
  • Some of the ways student loans can be confusing to understand
  • How COVID-19 impacted student loan repayment
  • What to do when you can’t pay your student loan debt
  • Student loan forbearance
  • Consequences of student loan default including wage garnishment
  • Student loan forgiveness and cancellation options
  • Defense to student loan repayment as a law
  • Statute of limitations on student loan debt
  • When should you ask for help
  • Student loan refinance and repayment scams
  • What parents should know about college tuition and student loan repayment
  • How to lower your student loan debt from the very start
  • Scholarships and tax credits to help lower student loan debt
  • How student loans impact your taxes

About Kelly:

Kelly Phillips Erb created and hosts the Taxgirl podcast, your home for tax news, tax info and tax policy. In each episode, she shares conversations about taxes, money and the choices we make. Kelly is a practicing tax attorney who works with taxpayers like you every day. She helps folks out of tax jams, and hopefully, keep others from getting into them.

You can find out more about Kelly here and you can follow her on Twitter, Facebook, Instagram, and Linkedin.

Links:

Kelly’s Website – Taxgirl

Jay Fleischman’s website – Money Wise Lawyer

Jay Fleischman – Twitter

Jay Fleischman – Facebook

Jay Fleischman – Tik Tok

Student Loan podcast

The Internal Revenue Service (IRS) is reminding taxpayers about a temporary tax break that will allow more people to deduct up to $300 in donations to qualifying charities this year.

Taxpayers who make cash donations of up to $300 before December 31, 2020, are now eligible for a charitable deduction when they file in 2021 – even if they don’t itemize. As part of the CARES Act, the special $300 deduction is available to taxpayers who choose to take the standard deduction, rather than itemizing their deductions.

Above-The-Line Deductions

Those kinds of deductions are sometimes called “above-the-line” deductions, or adjustments to income, since they come off the top, lowering both adjusted gross income and taxable income. Assuming that the IRS doesn’t make further changes to Form 1040 before next filing season, you’ll see the deduction on the front page of your tax return at line 10(b):

While there have been some questions about Congress’ intent, the most recent IRS instructions indicate that the deduction is limited to $300 – even for married couples.

Nearly nine in 10 taxpayers now take the standard deduction and could potentially qualify for this new tax deduction. In tax-year 2018, the most recent year for which complete figures are available, more than 134 million taxpayers claimed the standard deduction, just over 87% of all filers.

“Our nation’s charities are struggling to help those suffering from COVID-19, and many deserving organizations can use all the help they can get,” said IRS Commissioner Chuck Rettig. “The IRS reminds people there’s a new provision that allows for up to $300 in cash donations to qualifying organizations to be deducted from income. We encourage people to explore this option to help deserving tax-exempt organizations – and the people and causes they serve.”

You can confirm an organization’s charitable status by using the Internal Revenue Service’s (IRS’) online tool, the Tax Exempt Organization Search (TEOS). Additionally, most charities will post evidence of tax-exempt status on their website.

Cash Donations Defined.

For purposes of the deduction, cash donations are those made by check, credit card or debit card.

Cash deductions don’t include securities (stocks), household items, or other property (don’t worry those are, of course, still deductible if you itemize your deductions). Though cash contributions to most charitable organizations qualify, those made to supporting organizations and donor-advised funds do not.

Get A Receipt – Even For Cash.

Cash deductions, regardless of the amount, must be substantiated by a bank record (such as a canceled check or credit card receipt, clearly annotated with the name of the charity) or in writing from the organization. The writing must include the date, the amount and the organization that received the donation. You can claim a deduction for a contribution of $250 or more only if you have an acknowledgment of your contribution from the qualified organization. As a best practice, I suggest always asking for a receipt – almost any charitable organization worth its salt will happily offer you one. You don’t have to submit documentation along with your tax return but you need to be prepared to provide it at audit.

More Tips – And How To Nominate Your Favorite Charity

For more tips on charitable giving, click here.

And to nominate your favorite charity in this year’s 12 Days of Charitable Giving, click here.

The Internal Revenue Service (IRS) has issued final regulations relating to section 1031 like-kind exchanges.

1031 Like-Kind Requirements

We call them 1031 like-kind exchanges because the rules are found at section 1031 of the Tax Code (clever, I know). The provision allows you to defer tax on gain if – and it’s a big if – you participate in a qualifying like-kind exchange that meets some pretty specific requirements:

  • The property to be exchanged must have been held for productive use in a trade or business or for investment (and must be exchanged for a property similarly held). Personal residences or vacation homes for personal use won’t qualify.
  • The property doesn’t have to be real estate (though it typically is). It cannot be: stock in trade or other property held primarily for sale; stocks, bonds, or notes; other securities or evidences of indebtedness or interest; interests in a partnership; certificates of trust or beneficial interests; or choses in action (but see below changes under the TCJA).
  • The exchange does not have to be exclusively for like-kind property. It can include like-kind property and other sources of compensation such as cash. However, to the extent that you receive property that doesn’t qualify as like-kind, you may trigger some taxable gain (in other words, you can have gain and deferral in the same year).
  • The properties must be similar. Generally, that means that it needs to be of the same nature, character or class (real estate to real estate, for example). The rules for personal property exchange are a bit more restrictive (my favorite example of this is that livestock of different sexes are not property of a like-kind).
  • The property to be exchanged must be clearly identified within 45 days from the date you sell the original property.
  • The deal must be completed (meaning you have to be in control of the replacement property) no later than 180 days after the earlier of the original sale or the due date of the income tax return for the tax year in which the original property was sold.

Some tricky rules and restrictions apply to basis and other limitations. You can find out more here.

Changes Under The TCJA

The rules have been settled for awhile, but the Tax Cuts and Jobs Act (TCJA) limited like-kind exchange treatment to exchanges of real property.

Specifically, as of January 1, 2018, exchanges of personal or intangible property such as vehicles, artwork, collectibles, patents, and other intellectual property generally do not qualify as tax-deferred like-kind exchanges. Also, like-kind exchange treatment applies only to exchanges of real property held for use in a trade or business or for investment. That means that exchange of real property held primarily for sale (common in real estate heavy businesses) does not qualify as a like-kind exchange.

IRS 2020 Final Regulations

Under the final regulations, real property includes land and generally anything permanently built on or attached to land. That would include, for example, permanently affixed items such as gas lines, cooling units, and piping (without regard to whether those items comprise part of an income-generating structure). The rule is that machinery and equipment will be characterized as real property if they comprise an inherently permanent structure, a structural component, or are real property under the State or local law test.

It also generally means property that is characterized as real property under applicable state or local law. An example in the regulations included “shares in a mutual ditch, reservoir, or irrigation company described in section 501(c)(12)(A) [of the Code]if at the time of the exchange such shares have been recognized by the highest court or statute of the State in which the company is organized as constituting or representing real property or an interest in real property.” That language was originally included in a Conference Report and the premise – to include property characterized as real property under state and local law – incorporated into the regulations.

And, now, certain intangible property related to real property, such as leaseholds or easements, qualifies as real property under section 1031.

Form 8824, Like-Kind Exchanges

As before, to report a like-kind exchange, taxpayers must file Form 8824, Like-Kind Exchanges, with your tax return for the year you transfer property as part of a like-kind exchange. The final regulations do not change the due date or reporting information.

You can download the final regulations here.

The difference between being organized or not can be thousands of dollars when it comes to your taxes and finances. This week on the Taxgirl podcast, Kelly talks to Karen R. Caccavo about organizing tips for your tax information and financials throughout the year so they’re ready to go when you actually need them.

Whether you do your taxes online, go to a certified tax professional, or even have your own accountant, being organized is an important step to keeping your finances in proper order. Karen has a wealth of organizing tips to help you de-clutter your life, office, and business so you’re better prepared.

Organizing tips for your business and life

Karen R. Caccavo joins Kelly on the Taxgirl podcast to talk about getting organized. Karen is a daily money manager and organization expert that has helped people get their business lives under control as well as assisting in managing personal finances. She has a

Listen to Kelly and Karen talk about organizing tips:

  • Getting motivated to get organized
  • Do you really need to keep all of your receipts?
  • How to be more organized when your job is in your car
  • Keeping your personal life separate from your business life
  • How to start getting organized
  • How professional organizers work
  • Finding a professional organizer?
  • Learning to let go of things
  • Cleaning up and organizing the clutter
  • Knowing your crutches and issues so you can avoid those pitfalls
  • Using a power of attorney to get things done with elderly clients
  • Utilizing informed delivery with incoming mail
  • Organizing while at home during the coronavirus pandemic
  • Managing expectations about how organized you can actually be
  • Knowing when you need outside help getting organized

About Kelly:

Kelly Phillips Erb created and hosts the Taxgirl podcast, your home for tax news, tax info and tax policy. In each episode, she shares conversations about taxes, money and the choices we make. Kelly is a practicing tax attorney who works with taxpayers like you every day. She helps folks out of tax jams, and hopefully, keep others from getting into them.

You can find out more about Kelly here and you can follow her on Twitter, Facebook, Instagram, and Linkedin.

Kelly’s Website – Taxgirl

American Association of Daily Money Managers (AADMM) 

National Association of Productivity & Organizing Professionals (NAPO)

Karen R. Caccavo’s website – Personal Money Manager

Chances are, you’ve already received your stimulus check this year. But if you haven’t, and you qualify for one, you need to act fast if you want to receive it in 2020: the deadline is 3 p.m. EST this Saturday, November 21, 2020, to register.

If you are a non-filer and you have not received your payment, you must register with the Internal Revenue Service (IRS) by using the Non-Filers: Enter Info Here tool on IRS.gov before the deadline.

This does not apply to taxpayers who normally file a tax return, or taxpayers who need to file a tax return for 2019. It applies to those who don’t typically file a tax return, or those who do not typically need to file a tax return, and have not yet registered using the non-filer tool.

The deadline also applies to certain benefit recipients who got a stimulus check for themselves but need to provide information about a non-beneficiary spouse or qualifying child. That includes those who receive benefits through the Social Security Administration and the Department of Veteran’s Affairs.

If you register by the deadline, you should receive payment during the final weeks of 2020.

If you did not receive your payment in 2020 and you were entitled to receive a check, you may be eligible to claim your payment when you file your 2020 tax return in 2021. You’ll do that directly on your tax return.

You can check the status of your payment by using the Get My Payment application, available on IRS.gov. The Get My Payment application will show “Payment Status Not Available” until the payment is scheduled to be issued.

And remember: Stimulus checks are not taxable for federal income tax purposes.

All taxpayers deserve quality taxpayer support and representation. However, this can be a costly avenue to achieve. Many taxpayers who stumble upon a tax dispute are unaware of the assistance out there. In this week’s podcast, Kelly talks about options for taxpayer help. The LITC, also known as Low Income Taxpayer Clinics, are independent organizations in place to help taxpayers in need fight their disputes.

Educating Taxpayers on LITC

Kelly invites William Schmidt, Clinic Director at Kansas Legal Services, to better explain the ins and outs of LITC and taxpayer assistance programs. William has also co-authored a chapter for the American Bar Association on preparing clients for IRS disputes. In addition, William has a podcast, Tax Justice Warriors. Kelly and William share how the public can find and benefit from tax assistance.

Listen to Kelly and William talk such as:

  • How William found his way to LITCS
  • LITCS affiliations
  • Three types of Taxpayer Clinics
  • Legal aid preparation problems
  • Type of cases William handles
  • Real Estate tax concerns
  • How clinics balance cases
  • Poverty levels and funding
  • Number of Taxpayers helped per year
  • Outreach and education to the Public
  • Tax mistakes and resolutions
  • Virtual Settlements
  • Case and Trial expectations

About Kelly:

Kelly Phillips Erb created and hosts the Taxgirl podcast, your home for tax news, tax info and tax policy. In each episode, she shares conversations about taxes, money and the choices we make. Kelly is a practicing tax attorney who works with taxpayers like you every day. She helps folks out of tax jams, and hopefully, keep others from getting into them.

You can find out more about Kelly here and you can follow her on Twitter, Facebook, Instagram, and Linkedin.

Kelly’s Website – Taxgirl

LITC

William Schmidt – LinkedIn

William Schmidt’s – American Bar Tribute

William’s Podcast – Tax Justice Warriors

The Internal Revenue Service (IRS) is reminding qualified college students that it’s not too late to register for a stimulus check. If you are a self-supporting student and don’t need to file a tax return, you have until November 21 to register to get your stimulus check (also called an Economic Impact Payment, or EIP) by the end of the year.

“The IRS is working hard with our partners across the country to raise awareness about the upcoming deadline to register for a payment,” said IRS Commissioner Chuck Rettig. “College students in particular should be careful not to overlook these payments if they’re supporting themselves and can’t be claimed as a dependent on someone’s tax returns. A few minutes of research could really help students.”

Dependents Do Not Qualify

Not sure if that means you? Dependent students do not qualify for a check. If your parents claim you as a dependent – or if someone else, like a spouse or significant other claims you – you are not eligible for a payment.

Who qualifies as a dependent? For purposes of the stimulus check, a dependent is a qualifying child or qualifying relative. The IRS clarifies, at Pub 501, that a qualifying child meets the following criteria:

  1. The child must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them.
  2. The child must be (a) under age 19 at the end of the year and younger than you (or your spouse if filing jointly), (b) under age 24 at the end of the year, a student, and younger than you (or your spouse if filing jointly), or (c) any age if permanently and totally disabled.
  3. The child must have lived with you for more than half of the year (some exceptions apply, including for school and the military).
  4. The child must not have provided more than half of his or her own support for the year.
  5. The child must not be filing a joint return for the year (unless that joint return is filed only to claim a refund of withheld income tax or estimated tax paid).

Realistically, many high school seniors, college students, and adult children living at home don’t provide more than half of their own support. Many rely on their parents to pay their expenses, including health care. If that’s the case, that makes them – for tax purposes – a dependent so long as the other criteria apply.

(If you’re not sure whether a child provided more than half of his or her own support, you may find this IRS Worksheet helpful.)

If, however, a student or other adult child does not qualify as a dependent, they may be eligible for a check.

So, what about recent graduates who might have been a dependent before, but aren’t in 2020? The IRS reminds you that some recent college graduates from 2019 and 2020 may not have received a check because they were previously claimed as a dependent by their parents or someone else. But, these graduates they may be eligible for a check when they file their 2020 tax return in early 2021.

How To Register To Get A Stimulus Check

If you qualify but you don’t normally file a tax return, you’ll need to register. To register for your payment as a non-filer, simply click over to the IRS website and use the Non-Filers: Enter Payment Info Here tool. There is no cost to register. You can speed up your check’s arrival by choosing to receive it by direct deposit; if you don’t opt for direct deposit, you’ll get a paper check by mail.

If you cannot use the tool or don’t have adequate access to the internet, you can file a federal income tax return for 2019 with the IRS even if you receive non-taxable income or do not make enough money to normally have to file a tax return. The IRS encourages taxpayers to file electronically through their tax preparer, tax software provider, or IRS Free File.

But file soon: the tool will not be available after November 21.

Who Shouldn’t Use The Tool?

If you either need to or want to file a regular tax return, you should not use the Non-Filers tool. This includes, for example, those who had federal income tax withheld from their pay (like those of you who work part-time or only in summer) and want to file a return to claim a tax refund.

Track The Status Of Your Payment

If you’re anxious to receive your check, you will be able to monitor its progress. Beginning two weeks after you register, you can track the status of their payment using the Get My Payment tool, available only on IRS.gov.

National EIP Registration Day

The push to get the word out coincides with the run up to “National EIP Registration Day” on November 10. The event is intended to serve as a final push for those who don’t normally file a tax return to register to receive a stimulus check.

“National EIP Registration Day” will feature support from IRS partner groups inside and outside of the tax community, including those that work with low-income and underserved communities. Many of those groups have been working with the IRS, helping translate and making available stimulus check information and resources in 35 languages. For more information, check out irs.gov.

There was an article that circulated recently suggesting that bankruptcies didn’t peak as expected. If the folks who are reaching out to me are any indication, just give it time. With unemployment numbers still high and many areas still under shutdown orders due to the pandemic, it’s clear that the economy is not back to normal. And one of the consequences of that economy is the inability of many consumers to pay off debt.

When you can’t pay off your debt, you may settle with the creditor for less than you owe. This can take a few forms, including short sales, foreclosures, or just agreeing with a credit card company to pay less than you owe if they stop chasing you for the balance.

No matter the form it takes, if you have cancellation of debt for less than the amount you owe, the amount of the canceled debt is considered income and may be taxable. I say “may” because there are exceptions and exclusions to this rule.

Form 1099-C

Here’s what you need to know. The lender or business owed the debt will sometimes issue Form 1099-C, Cancellation of Debt, to you for the forgiven amount. The IRS also gets a copy of Form 1099-C. The IRS will expect to see that amount reported on your tax return.

But what if you qualify for an exclusion or an exception? Even if you eligible for an exception or exclusion, you may still receive a form 1099-C. This is because the creditor doesn’t know whether you might have an exception or an exclusion: their responsibility is simply to report the details, including the amount of cancellation of debt and the date of cancellation. However, if the person who is issuing the form 1099-C has reason to know that the discharge of debt would not be reportable (such as, for example, a qualifying bankruptcy), then the form 1099-C shouldn’t be issued.

Exclusions & Exceptions

The most common exclusions include bankruptcy, insolvency, and qualified principal residence indebtedness.

If your debt was canceled as part of a Title 11 bankruptcy (includes Chapters 7, 11, and 13), it’s not includible in your income. To report the exclusion, attach Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), (downloads as a PDF) to your tax return and check the box at Part I, line 1a of the form. Enter the amount of canceled debt as a result of the bankruptcy case on line 2. You may also have to fill out part II of the form.

If you were insolvent just before your debt was canceled, you can exclude the debt from income. Use the insolvency worksheet (found in Pub 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments (for Individuals) (downloads as a PDF), to figure out whether this applies to you. Generally, you are insolvent to the extent that the total of all of your liabilities was more than the value of all of your assets immediately before the cancellation. To report the exclusion, attach Form 982 to your tax return and check the box at Part I, line 1b of the form. Enter the smaller of the amount of the debt canceled or the amount by which you were insolvent immediately before the cancellation (use the worksheet to find this figure). You may also have to fill out part II of the form.

If your canceled debt is qualified principal residence indebtedness, it’s not includible in your income. Qualified principal residence indebtedness means a mortgage that you took out to buy, build, or substantially improve your main home (the one you live in most of the time). The mortgage must be secured by your main home, and the amount available for exclusion must not exceed $2 million ($1 million if married filing separately). To report the exclusion, attach Form 982 to your tax return and check the box at Part I, line 1e of the form. Enter the amount of the forgiven mortgage on line 2 but do not report more than the amount of the exclusion limit. If you continue to own your home after cancellation of qualified principal residence indebtedness, you must reduce your basis (generally, the purchase price plus adjustments) in the home.

Special Circumstances

If you and another person were jointly and severally liable for a canceled debt, each of you may get a Form 1099-C showing the entire amount of the canceled debt. Don’t panic: you may not have to report that entire amount as income. The amount (if any) you must report depends on facts and circumstances, including state law, how much each of you received, how much of any interest deduction from the debt was claimed by each person (think home mortgage), how much basis was allocated to each of you, and whether the canceled debt qualifies for any other exceptions or exclusion.

If your student loan is canceled in part or in whole, you may not have to include the canceled debt in your income. To exclude canceled student loan debt from your income, your loan must have been made by a qualified lender to assist you in attending an eligible educational institution. In addition, the cancellation must be due to death or permanent and total disability, or as part of a provision in the loan that all or part of the debt will be canceled if you work for a certain period of time (like certain teaching or public service arrangements). The canceled debt is not excludable if it is canceled because of services you performed for the educational institution that made the loan or provided the funds.

Be Careful

The rules governing cancellation of debt can be tricky. It’s best to consider the consequences before you enter into an agreement to settle a debt for less than what you owe. But even if it’s after you make the decision – or if the decision is made for you – consider consulting with your tax professional.


Author’s Note: This piece focuses on consumers who can’t pay their bills. To find out more about the business side (when you’re the one owed), click here.

If you, like me, joined millions of other taxpayers in filing for an extension this year, be sure to check your calendar: October 15 is the due date to file your 2019 tax return.

To avoid late filing penalties, you need to file on or before the October 15 deadline. If you owe taxes, you’ll want to pay as soon as possible to reduce any penalties and interest.

Timely File Your Return

Even on extension, the rules for timely filing your return still apply. That means that you need to have your return postmarked on or before midnight on October 15, 2020. If you want a little extra breathing room, do it as soon as possible.

If you’re filing electronically, the same general rules apply: you’ll want your return postmarked electronically on or before midnight on October 15, 2020. Under the Regs (§ 301.7502-1(d)), that means that the return is transmitted via an authorized electronic return transmitter and received by the IRS in a processable form.

IRS Free File Still Open

If you want to file using Free File, you can file online with the software until October 15 at midnight ET. You can print your returns until October 20.

IRS Free File lets you prepare and file your federal income tax online for free. File at an IRS partner site with the IRS Free File Program or use Free File Fillable Forms.

Some Taxpayers Get More Time

Some taxpayers are entitled to an automatic extension of time to file without having to do anything. That includes:

  • Members of the military and others serving in combat zones or hazardous zone areas generally have until at least 180 days after they leave the zone to file returns and pay any taxes due.
  • Taxpayers affected by natural disasters, including victims of Hurricane Sally and the Oregon wildfires, may have extra time. For more details, check the disaster relief page on the IRS website.

Choose Direct Deposit For Refunds

If you’re expecting a refund, consider direct deposit. Direct deposit is much faster than waiting for a paper check to arrive in the mail. You can track your refund with the Where’s My Refund? tool (or use the IRS2Go app).

Pay Electronically

You can make your federal tax payments online, by phone or with your mobile device and the IRS2Go app. You can find out more about paying your taxes here. And if you can’t pay your bill, options are still available, including installment agreements.

Help Is Available

IRS.gov has answers for Frequently Asked Questions.

The IRS website has tax information in many languages including:

Skip to content