The Internal Revenue Service (IRS) and Treasury issue guidance for students with discharged student loans as well as their creditors. More people with discharged student loans can now receive tax relief with the newly issued Revenue Procedure 2020-11 (PDF) guidance in USA. Under the latest IRS-Treasury guidance for discharged student loans, many of the taxpayers with the discharged student loans will not require to report the amount of their loan as the gross income on their federal tax returns. It must be kept in mind that this guidance is effective for those loans only that are discharged in 2016 and later on. Furthermore, those taxpayers who are eligible to get tax relief under the guidance are also eligible for claiming refunds for the tax overpayment.
The Details of IRS Tax Relief:
The Internal Revenue Service and Department of the Treasury made a joint effort to issue the guidance for discharged student loan tax relief. Under this guidance, those taxpayers who took out federal or private student loans can get extended relief. These federal and private student loans include those that are taken out to finance attendance at a nonprofit or for-profit school.
Furthermore, along with discharged student loan, their creditors can also get tax relief under the same guidance. Otherwise, the creditors of discharged student loans were previously required for filing information returns and providing payee statements for the discharge of any indebtedness. It was a mandatory procedure by the IRS that has been extended for relief by the newly issued latest guidance for discharged student loans & their creditors.
The IRS and the Treasury Department jointly decided for the extension of the tax relief provided in Rev. Proc. 2015-57, Rev. Proc. 2017-24 and Rev. Proc. 2018-39 to the taxpayers who took out loan. The condition is applied the loan must be taken out from federal and private student loans to finance attendance at nonprofit or other for-profit schools not owned by Corinthian College, Inc. or American Career Institutes, Inc. relief is provided in the Revenue Procedure when the Department of Education discharged the federal loans under the Closed School or Defense to Repayment discharge process. Furthermore, those private loans are also included that were discharged on the basis of on settlements of specific types of legal causes of action against nonprofit or supplementary for-profit schools as well as particular private lenders.
Those taxpayers who are eligible to cover the scope of this revenue procedure will not recognize gross income as a result of the discharge. Along with it, those taxpayers are not required to report the amount of the discharged loan in gross income on their federal income tax return filing. The scope of this revenue procedure also cover the creditors as they are not required to must file information returns and furnish payee statements for the discharge of any indebtedness. In order to avoid any confusion, it’s strongly recommended by the IRS that the creditors must not furnish students and the IRS with a Form 1099-C.
That was all regarding Treasury Tax Relief Guidance, If you want any financial advisory for loan resolution in USA, our representatives are always ready to help you.