I received a letter from the IRS yesterday saying because I had $10,000 of student loan debt canceled in 2019 that I now owed them $1,871.00 because I failed to list that as income when I filed back in 2020. I wasn’t aware I had any canceled loans till I received this letter. Is there a law that makes it so we don’t have to pay taxes for student loans that are canceled?
It depends on how the loans were cancelled. It is hard to tell more without seeing the contents of the letter you got.
It is strange that you were not aware you got your loans cancelled. Were these federal or private loans?
They were private. I had a lot of private student loans. All the private ones were through Chase. I can send you the letters or attach them in this forum if you’d like to see them.
It makes more sense that these were private.
Were these loans for a fraudulent for-profit school? If so, you might be able to challenge the legitimacy of this debt through something called the “holder rule.” You would need to get the help of a local lawyer to do that. Start with your local legal aid society.
If these were not for a fraudulent school, then you should talk to a tax specialist/CPA to discover what your options are.
Yes, they were for a fraudulent school. Should I hold off responding to their letter asking if I agree or disagree with the change they want to make to my 2019 Tax return?
The letter says they need to receive it by October 20th. I would need to have it in the mail by the 14th.
I said in my letter I disagree with the proposed changes they want to make. I said I don’t recall a loan for that amount with them. I never received a 1099-C form about any cancelled debt. I asked for a copy of what Chase sent them. I asked for proof of original debt.
I’m also trying to call them, but so far they either say they’re too busy & to try back again or write them.
This is beyond my area of expertise. I’d reach out to your local legal aid society and explain the situation and see if you can get some assistance.
Will do. Thanks!
I read this article & it applies to me. I need to know how I am deemed insolvent immediately prior to having my student loans canceled. I’ve already had $10,000 of student loan canceled in 2019 that I wasn’t aware of until this year. I have over $279,000 in student loans and if I have my defense of repayment go through I don’t want to have to pay taxes on those loans that are forgiven so how do I go about becoming insolvent prior to having them forgiven? I went to a fraudulent school. Taxes on Forgiven Student Loans: What to Know | Student Loan Hero