Amending Taxes for Student Loans

[new doctor]

Hi all,

I am pursuing PSLF and am almost 3 years in with 3-4 more years of fellowship. My wife and I have been filing taxes separately for student loan purposes. Each year we have been hit with a tax payment of around $3000-6000 because of our incomes and filing taxes separately.

My question is has anybody filed their taxes separately and then 1-2 years later amended their tax return to married filing jointly? If so, what is the overall opinion of this strategy in terms of PSLF and overall legality of this.

Thanks in advance!!!

[Ekanive23]

Legal. Many high end student loan advisors recommend this. Not illegal at all.

A couple with two doctors making 400000 k each would save 40 k on loans if one was going for plsf and recoup the money spent on taxes when they amend taxes. It’s brilliant

[Panscan]

You’re a resident and you’re hit with a 3-6k tax payment ? How exactly is that happening ?

So you file separately for the repayment plans and then you addend it to be married ? It may be legal but that sounds sketchy and a way to have your payments not count.

[Ekanive23]

You’re a resident and you’re hit with a 3-6k tax payment ? How exactly is that happening ?

So you file separately for the repayment plans and then you addend it to be married ? It may be legal but that sounds sketchy and a way to have your payments not count.

They count. 100 percent. This is utilized, it seems sketch to you. To me it’s just a loophole that can be used just like a backdoor Roth. Don’t try to talk him out if it by saying how you feel things won’t count when this is actually the optimal plan

[DavidGlennCPA]

It's completely legal as far as the IRS is concerned. You even get paid interest on your refund.

I did this for a couple of years because my wife has some big school loans. I waited until I had re-verified my income then amended the earlier tax year. This way there was always a MFS return in the way of the one I was amending. For example, if I had just used my 2018 return to determine the payment then I'd amend the 2017 return.

I can't speak to the legality or ethics of this strategy as far as the student loans are concerned but it does seem to go against at least the spirit of the law.

[East coast]

A few yrs back when I first heard about this I spent a few hrs googling for case law and couldn't find any. Does that make it 'legal'? Heck no. But just be ready to defend yourself when pslf review happens when they ask questions. Also be ready for them to say you owe back taxes or something after that review is done. Do I think that will happen? No, but I'd be mentally prepared for it to happen at the end of 10yrs.

[jfoxcpacfp]

Absolutely you can do this. Be aware that you cannot do the opposite if the filing deadline has passed (i.e. amend to change from MFJ to MFS). MFJ makes you legally liable for each other’s tax debts, so this is a plus for the IRS.

[Ekanive23]

A few yrs back when I first heard about this I spent a few hrs googling for case law and couldn't find any. Does that make it 'legal'? Heck no. But just be ready to defend yourself when pslf review happens when they ask questions. Also be ready for them to say you owe back taxes or something after that review is done. Do I think that will happen? No, but I'd be mentally prepared for it to happen at the end of 10yrs.

The piece to the puzzle that should put anyone at ease is that the IRS and loan services are separate entities and don’t communicate.

There is now way for communication to be sent to loan serviced saying that you amended.

only thing I would do is wait 1-2 years before reversing.

[Panscan]

Just because something is legal doesn't mean it's ethical. I would say it's ridiculous and inappropriate to knowingly file your taxes in a certain manner to lower student loan payments with the specific intent to addend them to a different manner at a later date. That seems blatantly fraudulent to me. To each their own.

[Ekanive23]

Just because something is legal doesn't mean it's ethical. I would say it's ridiculous and inappropriate to knowingly file your taxes in a certain manner to lower student loan payments with the specific intent to addend them to a different manner at a later date. That seems blatantly fraudulent to me. To each their own.

I can see where you could have qualms. However, it’s allowed and helps so much it literally makes plsf a great option for any physician or physician couple.

Your distaste should be guided at people writing off millions and tens of millions off on taxes down to 0.

people taking advantage of this set up, have done their homework, or hired the right people, like a couple of the people above to give them advice.

when it comes to right vs wrong, me vs government, it’s simply whatever is legal that we can do, we should do, IMO. There is no smell test other than legality. I take a much more gentle approach on billing so I gotta lay down the hammer elsewhere.

loans and costs have gotten out of hand and a lot of the physicians 50 years old or older can’t grasp what we’re getting into,

[Panscan]

I can see where you could have qualms. However, it’s allowed and helps so much it literally makes plsf a great option for any physician or physician couple.

Your distaste should be guided at people writing off millions and tens of millions off on taxes down to 0.

people taking advantage of this set up, have done their homework, or hired the right people, like a couple of the people above to give them advice.

when it comes to right vs wrong, me vs government, it’s simply whatever is legal that we can do, we should do, IMO. There is no smell test other than legality. I take a much more gentle approach on billing so I gotta lay down the hammer elsewhere.

loans and costs have gotten out of hand and a lot of the physicians 50 years old or older can’t grasp what we’re getting into,

so to summarize it helps people take advantage of a program they shouldn't be able to take advantage of because of a loophole. It's ironic to have a problem with billionaires and their low effective tax rates but act like this is A-OK. A two physician couple trying to game the system and purposefully falsely filing their tax status is much closer to your billionaires gaming the system than they are to common joe. it's also not one or the other.

I don't think the cost of education or loans affects the ethics involved. If this couple were 2 million dollars in debt or paying 20 % interest I would still say it is unethical.

[Ekanive23]

so to summarize it helps people take advantage of a program they shouldn't be able to take advantage of because of a loophole. It's ironic to have a problem with billionaires and their low effective tax rates but act like this is A-OK. A two physician couple trying to game the system and purposefully falsely filing their tax status is much closer to your billionaires gaming the system than they are to common joe. it's also not one or the other.

I don't think the cost of education or loans affects the ethics involved. If this couple were 2 million dollars in debt or paying 20 % interest I would still say it is unethical.

do you use a backdoor Roth? No different than that. If it’s legal, it’s ethical when it comes to taxes. I have 0 qualms with doing homework, being educated, and saving a buck.

when i go to confession, this is not something I’d feel obligated to tell a priest snd id feel just fine about that.
The only reason I’m giving you a hard time is because people are so opinionated about loans.... they didn’t ask for your ethical opinion. They asked for legality. Frankly, the fact people have ethical objection to it, makes me want to do it more to exploit a “rigged” system where universities and loan servicing companies are printing money.

im one of the people working the game to my advantage as well. I don’t get why people are so upset over doing things like this.

there are ways I’m going to extend taxes this year to recertify and use 2019 taxes for the next year and ensure I qualify for more stimulus too since I just made the change from resident to attending.

I’ll take anything where I can. I’ll pay plenty in taxes my whole life... I’ll take some support when I need it. Programs like this and loopholes have allowed me to have a big family and I love it.

plsf Already lowered what id pay from like 800 k over 10 years to 220 k. Cares act shaved a nice 5 figure sum from that even further.

[endo4jc]

do you use a backdoor Roth? No different than that. If it’s legal, it’s ethical when it comes to taxes. I have 0 qualms with doing homework, being educated, and saving a buck.

when i go to confession, this is not something I’d feel obligated to tell a priest snd id feel just fine about that.
The only reason I’m giving you a hard time is because people are so opinionated about loans.... they didn’t ask for your ethical opinion. They asked for legality. Frankly, the fact people have ethical objection to it, makes me want to do it more to exploit a “rigged” system where universities and loan servicing companies are printing money.

im one of the people working the game to my advantage as well. I don’t get why people are so upset over doing things like this.

there are ways I’m going to extend taxes this year to recertify and use 2019 taxes for the next year and ensure I qualify for more stimulus too since I just made the change from resident to attending.

I’ll take anything where I can. I’ll pay plenty in taxes my whole life... I’ll take some support when I need it. Programs like this and loopholes have allowed me to have a big family and I love it.

plsf Already lowered what id pay from like 800 k over 10 years to 220 k. Cares act shaved a nice 5 figure sum from that even further.

Your opinion is that is not sketchy because it significantly benefits you. This is only like the back door Roth because it is considered legal. Otherwise it is nothing like the back door Roth because you are using already taxed dollars to get in the Roth. It’s not like the IRS gives you back the taxes paid when the money is converted. Anyway, you are correct that people are opinionated on student loans. I believe PSLF should not be available to all physicians. We should be held accountable for the choices we make (attend expensive undergrad or medical school, etc). However, there should be some level of control over the cost of attendance. The outstanding student loan debt in this country is astounding.

[Ekanive23]

Your opinion is that is not sketchy because it significantly benefits you. This is only like the back door Roth because it is considered legal. Otherwise it is nothing like the back door Roth because you are using already taxed dollars to get in the Roth. It’s not like the IRS gives you back the taxes paid when the money is converted. Anyway, you are correct that people are opinionated on student loans. I believe PSLF should not be available to all physicians. We should be held accountable for the choices we make (attend expensive undergrad or medical school, etc). However, there should be some level of control over the cost of attendance. The outstanding student loan debt in this country is astounding.

Why not available to all physicians? It allowed me to stop pursuing fellowship and settle on a Hospitalist career, where do to arbitrage I am still able to make 350-500 k based on hustle and had a family at a young age. Is that not the point of this? To allow people to not be saddled with debt?

do you have loans? Did your parents pay for it? Did you pay it off? When did you borrow?

hold us accountable? I’d have to live a middle class life for a 15 years and have a small family if I didn’t do my research and analyze and pursue plsf due to my huge debt.

some level of control? I think there needs to total control. Cost of college has inflated by 5 percent a year since the 70s. Cost of my medical school went from 55 to 65 k a year while I was there...

until you fix colleges, you can’t fix these programs and the debt pushed onto us. You complaining about some of us getting a break is a joke in my opinion.

I’m sure changes are coming and who knows if they will benefit me or other physicians or not. I’m just glad I’ll be grandfathered in.

Once again, yes it is my opinion that it’s fine to do, to the original posters question. However.... that’s all they were asking. They were not asking about your jaded views on the matter. They were only asking for sound advice to do the best possible for themselves. If the program exists as it stands, why would you not do it...

id hate to see your opinion on people’s tax evasion with real estate. It’d probably put you into a rage if this gets you opinionated.

[endo4jc]

Why not available to all physicians? It allowed me to stop pursuing fellowship and settle on a Hospitalist career, where do to arbitrage I am still able to make 350-500 k based on hustle and had a family at a young age. Is that not the point of this? To allow people to not be saddled with debt?

do you have loans? Did your parents pay for it? Did you pay it off? When did you borrow?

hold us accountable? I’d have to live a middle class life for a 15 years and have a small family if I didn’t do my research and analyze and pursue plsf due to my huge debt.

some level of control? I think there needs to total control. Cost of college has inflated by 5 percent a year since the 70s. Cost of my medical school went from 55 to 65 k a year while I was there...

until you fix colleges, you can’t fix these programs and the debt pushed onto us. You complaining about some of us getting a break is a joke in my opinion.

I’m sure changes are coming and who knows if they will benefit me or other physicians or not. I’m just glad I’ll be grandfathered in.

Once again, yes it is my opinion that it’s fine to do, to the original posters question. However.... that’s all they were asking. They were not asking about your jaded views on the matter. They were only asking for sound advice to do the best possible for themselves. If the program exists as it stands, why would you not do it...

id hate to see your opinion on people’s tax evasion with real estate. It’d probably put you into a rage if this gets you opinionated.

I went to in state undergrad and medical school. Graduated medical school in 2013. Five year residency finished in 2018. One year fellowship finished in 2019. Refinanced in residency and again as an attending. I am paying a little less than $4,000 a month for my student loans to be paid off in 5 years. I chose a high paying surgical specialty.

Tone can be hard to note online so I won’t hold it again you that you used words like hate and rage towards me. I am aware that many people use real estate loss to carry over in order to lower their tax burden. I believe the word you meant to use was tax “avoidance”, not “evasion” as that is illegal. I am all for people legally lowering their taxes. This just seems to be one of the more sketchy techniques.

I’ve read several of your responses on this topic, and you seem to be fairly defensive about it. I will not become enraged by folks using real estate losses or any other technique to lower their tax bill. Cause as Bruce Banner says... I’m always angry.

Seriously, good luck to you and your family.