Abromson & Carey, Attorneys at Law
You Take Care of Your Health, We’ll Take Care of Your Case
27+ Years Helping the Disabled
Phone: 888-512-7031

IRS declines to fix student loan tax problem

On the heels of a recent post on this blog discussing how recipients of disability payments from the Social Security Administration can get their student loans forgiven, some sources claim that at a recent meeting, the Department of the Treasury, which controls the Internal Revenue Service, indicated that it had no intentions of changing its policy to collect taxes on all forgiven student loan debt, including that owed by disabled New Jersey residents.

A noted Democratic senator had laid out the case that the current practice puts disabled people in a sticky situation. On the one hand, getting a student loan forgiven when a person is disabled is probably a good thing, but the person who gets the benefit also has to pay taxes on the amount of the debt that was forgiven as per longstanding tax policy.

The problem is that if these disabled people do not pay their tax obligation, they can see their disability checks garnished by the IRS until the IRS gets its tax revenue. Because people on disability rarely have enough income to pay off the tax debt by other means, garnishment is often the only option.

For its part, the Treasury indicated that it felt a change in the current practice needs to come via a new federal law passed by Congress. While Congress does have the power to make this change, political difficulties might make it hard to actually pass a relief measure.

The most recent discussion of this issue came about because, as part of the current President's initiative to reduce student loan debt, the Department of Education has been matching those who are on disability against its list of those who owe loans. The Department has been contacting these people to encourage them to seek loan forgiveness.

Source: The Washington Post, "Feds refuse to stop taxing the canceled student debt of severely disabled people," Danielle-Douglas-Gabriel, Dec. 23, 2016.

No Comments

Leave a comment
Comment Information
contextual email us email us for a response

Contact form

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

office location

Abromson & Carey, Attorneys at Law
60 Park Place
Suite 509
Newark, NJ 07102

Toll Free: 888-512-7031
Phone: 973-623-5593
Fax: 973-624-4804
Map & Directions