Beginning in February, many borrowers will have their student loans cancelled as part of a new program dubbed the SAVE Repayment Plan. Where do they get these names?
Borrowers will be eligible for cancellation if they enrolled in the program and borrowed less than $12K or less to attend college while having made at least 10 years of payments. Those who took out more than $12K will also be eligible, but under a longer timeline. Each additional $1,000 borrowed will add another year to the 10 year standard prior to forgiveness.
The maximum repayment period is 20 years for individuals with an undergraduate degree. That period becomes 25 years for those with graduate school loans.
Opponents of the plan are saying that it’s a way to help wealthier Americans with their loans at the expense of those who didn’t attend college. Others are saying it’s a backdoor plan to make Community College free.
It should be noted that all forgiveness of debt, other than certain Pandemic Relief Packages, are subject to both Federal and State Income Taxes. Forgiveness provides an economic benefit, which is subject to tax.
The only way a taxpayer isn’t required to pay tax on this is if we can prove that the taxpayer was insolvent after the forgiveness event. At that point we can do a change of tax attributes and have the forgiveness become non-taxable.
Before anyone starts whining about paying taxes on this, think of people like me and my wife who saved from the year their daughter was born, so that she could graduate college without being in debt. Where’s our relief?
In more news of the weird, newly minted IRS Commissioner Danny Werfel is touting the fact that the Service was able to collect $520M in the past year from wealthy taxpayers while our current Tax Gap is estimated at $688B.
Let’s put that into perspective. You own a business where you have $688B in receivables. Your new manager comes in bragging that he was able to collect $520M of the receivable. Would you keep that manager?
Let me leave you with this.
I’m currently getting a lot of questions about the Employee Retention Credit, so let’s take a moment and answer some questions.
The IRS Is No Longer Processing New Applications
As of September of last year, the IRS stopped processing new ERC’s. They were supposed to begin processing them again at the beginning of this year, but the moratorium is still in place.
If the moratorium is lifted, we’ll again begin qualifying new applicants under our strict guidelines and will continue processing the Employee Retention Credit’s with the highest standards of quality in the industry.
But the program is closed. If they begin processing new applications again, I’ll let you know.
If You Filed An ERC Prior To The September Moratorium, Your Application Will Be Processed
The Service has stated that the ERC’s currently being processed will take at least 6 months. Be patient. They don’t do anything on time.
You can call them, but that normally doesn’t do much good. The least experienced agents they have answer the 800 numbers, and the only thing they can tell you is what their computer system tells them. Normally that isn’t much.
Given The Enhanced Scrutiny Measures, Should You Be Concerned?
Absolutely not. If you qualify, you qualify. All of the pandemic era relief packages are under enhanced scrutiny whether it was a PPP Loan or whatever else..
How hard would it be for an IRS Agent to look at your Governor’s Shut Down Order, and see that you qualify? They’re chasing down thieves. Unless you’re one, why would you worry?
It looks like we’re getting a bit of snow today. Get out there, grab a sled and play. A few years from now we probably won’t get snow anymore. That won’t break my heart, but we should probably try to enjoy it while we can.
We’re all going to get through this. Let’s get through it together.
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