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Old 03-27-2014, 11:24 PM
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Cancelled Debt 1099-c

My parents live with me, they are both on Social Security. They haven't filed taxes since they moved into my house. My mother had a stroke 7 years ago, she had an outstanding student loan which was cancelled and written off in 2013. I claim her on my taxes as a dependent. Does she need to pay taxes on the student loan if she is disabled and had her loan forgiven?



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Old 03-28-2014, 03:02 AM
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Originally Posted by MBaker View Post
My parents live with me, they are both on Social Security. They haven't filed taxes since they moved into my house. My mother had a stroke 7 years ago, she had an outstanding student loan which was cancelled and written off in 2013. I claim her on my taxes as a dependent. Does she need to pay taxes on the student loan if she is disabled and had her loan forgiven?
If your parent has a documented disability there may be an option for her to get her federal loans discharged or forgiven. This is not an impossible task;she may qualify for a disability discharge or forgiveness of her federal student loans if she is unable to work or otherwise earn an income in the future.she needs to contact the holders of her student loans to request a disability discharge form. She needs to meet the Dept of Edu's standards for disability. To qualify she has to be unable to work or earn money. If she is unable to work because of disability then she needs to call the student loan lender and ask for the discharge form. A person who is receiving Social Security Disability may not qualify for a student loan discharge, so be careful when thinking she may automatically qualify. On the flip side she does not have to be on disability to get her loan discharged. The only acceptable signature for this student loan discharge form is a medical doctor. The doctor must sign the form attesting to a couple of statements that verify the nature of her disability and in what way this prevents you from working and earning money. After sending in all the required forms now she has to wait until she hears back from the loan holder or the Disability Division of the Department of Education. If your mother meets the requirements to have her loan forgiven this does not mean her loan is gone right away. There is a conditional discharge period that lasts three years. But, the status of her loan changes, interest will stop accruing on her account, and collection on her account stops. It can take several weeks to hear back from the lender.



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Old 03-28-2014, 10:26 AM
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Join Date: Mar 2014
Location: Arizona
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Discharged Student Loan

My mother's loan has already been discharged. She received a 1099-C that states her debt has been cancelled. Will she have to pay taxes on what has been discharged?

She has not filed taxes in 7 years and she is 67 years old, with no income but her Social Security. My father does not work and he is 66, he also collects Social Security.



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Old 03-28-2014, 01:56 PM
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Originally Posted by MBaker View Post
My mother's loan has already been discharged. She received a 1099-C that states her debt has been cancelled. Will she have to pay taxes on what has been discharged?

She has not filed taxes in 7 years and she is 67 years old, with no income but her Social Security. My father does not work and he is 66, he also collects Social Security.
She still has to report the amount on the 1099-C. Even if she qualifies for one of the exclusion clauses, your mother has to report the amount and then file for the exclusion.so the amount on 1099C needs to to be reported on her taxes.BUT Not all canceled student loan debt is taxable. If her debt had been forgiven because she worked in a job that qualified her to have some or all of her debt wiped out (certain medical, teaching or law-enforcement positions, for example) she wouldn't now owe the IRS some of the forgiven debt. In addition, she may owe some dollars to the state for cancellation of debt income(depending on each state law I guess). ALSO this is not your case, however, student loans are usually even non-dischargeable in bankruptcy. This means that after your bankruptcy erases all your other debts, you still have to pay student loan debt. Filing bankruptcy can be an option in only one circumstance.The law lets you eliminate your student loans if paying them creates an "undue hardship" for you and your family.

For the list of qualifying events for exclusion, you can check it out with the IRS If you receive a Form 1099-C, that means anapplicable entity has reported an identifiableevent to the IRS regarding a debt you owe. Theidentifiable event may be an actual cancellationof the debt or it may be an event the applicableentity is required, solely for purposes of reportingto the IRS, to treat as a cancellation of debt.

note; Each individual state has their own requirements when it comes to the treatment of a student loan. For instance, the State of Pennsylvania does not require you to pay income taxes on a discharged student loan or any other loan as they do not consider loan forgiveness as personal income. For what your individual state requires of a discharged student loan, you will need to go to your local state's website and search "student loan discharge."



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