Student Loan Repayment reported on 1099. Two years on 2008...
I apply annually for student loan repayment through a state organization. For the past three years, I have received $5,000 per academic year for a grand total of $15,000. The organization is by no means prompt in their payment, so the checks aren't sent with any real eye towards "timing." I received my check for 2005-2006 in 2007 and reported it on that year's return. This past year, I received the check for 2006-2007 in January and the check for 2007-2008 in December (checks are based on the academic year). So I now have a 1099-MISC reporting $10,000 in income for the 2008 year. Needless to say, this is going to be a significant increase in my tax liability, specifically $5,000 more than anticipated (I had planned on $5,000/year for 3 years). I have a few questions:
1. Both checks are still sitting in the safe, so they have not been cashed (they expire in 2011). Can I somehow report them on separate years by sending them to the student loan holder, one per year? I'm not interested in avoiding the tax liability, just in spreading it out in $5,000/year increments.
2. Will this added income result in a penalty from the IRS if my tax liability exceeds $1,000 because of the timing of the two checks? We have tried to keep to our withholding, but the additional $10,000 is not only likely push us into the next bracket, but will add the additional $5,000 in liability for which we did not prepare.
3. Due to my wife quitting her job to raise our newborn son, we will be in a much lower tax bracket next year. Can i somehow postpone the use of that $10,000 and report it on the 2009 return? The checks have not yet been cashed, so I ave yet to use the money (I have no idea if this matters. It's simply a place my mind went.)
Last edited by TX Ciclista : 01-29-2009 at 11:30 PM.