Student Loan Rehab tax offset help

[tryintorepair]

Hi all,

 

Hoping to get clarification, suggestions and assistance from those of you with some experience.

 

I am currently rehabilitating my student loans, and am making payment number 5 next week actually. Last year, my taxes were offset and I lost my rather substantial refund. No fault but my own of course, but now I'm on the straight and narrow so to speak and handling things properly as well as working on my credit.

 

I was concerned that this would happen again this year, and have been doing some digging online. I found the IRS automated offset info number and called it today. It states that my taxes indeed "may be offset this year". So I called the US Dept of Education number provided by the IRS line. Worked through the automated stuff on there end, which didn't provide alot as it just referred me back to the collection agency rehabbing my loan. Managed to get a real person, who verified they were aware that I was making payments and verified the correct number made so far. I explained that I was concerned my refund would be taken this year as well as the fact that things are rather lean in my household and I wanated to do anything possible to assure I received my refund. Honestly I can't afford to lose it, as we're pretty much paycheck to paycheck at this point. She was polite and explained that the US Dept of Education would take any tax refunds until the rehab was complete, and had been transferred to a loan holder. She also said at that point it would take the new loan holder about 30 days to send notice to the Dept of Edu, and then it would be another 30 days (minimum) for this info to get from the Dept of Edu to the IRS and have them take me off the tax garnishment list.

 

Adding all of that up, it will be over 7 months before it "might" be possible to come off the IRS list.

 

Is this correct? I mean I understand that I heard it directly from the US Dept of Edu person, but I've seen postings on here ( One on the main page as I write this...) where people have gotten off of the IRS list after 4 payments. I've also read a discussion where the collection agency sends a verification letter to the Dept of Education to "de-certify" ( wrong term? ) the tax offset.

 

Any help would be greatly appreciated. I had truly hoped that here in a few weeks I would be able to get out of this hole I'm in once and for all as I've worked hard to pay off all old debts, and am trying to do things right. But I'm barely scraping by at the moment.

 

Thanks for any and all guidance.

 

 

 

[hodap2001]

It sounds as though your taxes will be offset again, even though you are in the Rehabilitation Program. The only way to have your tax refund returned to you is to file a Hardship with substantiated documentation showing that you are on the brink of homelessness, lights being cut off, or some other type hardship. Tax Offset Hardship are rarely approved and in only in extreme circumstances, so I would contact the collection agency to see what can be done to have your name removed from Tax Offset. You are pretty much at the will of the collection agency as this is a consequence of default (as you already are well aware of since you had this performed last year). There are really no other options available to you at this time.

[scvbd99]

Unfortunately, it depends on the loan holder/collection agency you happen to have.

 

Sounds like your loan holder/collection agency won't lift the tax offset until you're completely done with rehab and your loan has been picked up. It can take an extra couple of months after making your 9th rehab payment for it to get new funding.

 

I can only speak from experience, but ECMC sent in paperwork to remove my tax offset for my defaulted loans the day that I signed my rehabilitation agreement. It took a month for it to kick in with the Department of Treasury. Sallie Mae sent in paperwork to remove my tax offset after I made my 4th rehab payment.

 

HOWEVER, If you don't want them to take your tax return, then don't file your taxes until the offset is lifted. You aren't under any obligation to file if the IRS owes you money, and you have 3 years to collect returns on back taxes. It's an interest-free loan for the US Government until you do file for your tax return, so they're not going to ever force you to file or anything.

Edited January 10, 2014 by scvbd99

[tryintorepair]

Thanks for the information and advice. I'm going to contact the coolection agency I'm dealing with and see if there is anything they can or will do. Appreciate it much.

[jkk4life]

 

You aren't under any obligation to file if the IRS owes you money, and you have 3 years to collect returns on back taxes.

I am by no means a tax expert but I think that you have to file no atter what. Another idea is to request an extension which would give you until October to file which would give you plenty of time to finish the rehab. My sister is going through the same situation and that is what she plans to do.

[scvbd99]

 

 

You aren't under any obligation to file if the IRS owes you money, and you have 3 years to collect returns on back taxes.

I am by no means a tax expert but I think that you have to file no atter what. Another idea is to request an extension which would give you until October to file which would give you plenty of time to finish the rehab. My sister is going through the same situation and that is what she plans to do.

 

If you owe tax, then yes, you are required to file, and you have to pay more if you don't.

 

If the government owes you a tax return, you do not have to file. They're perfectly fine with you NOT filing because any money they owe you becomes an interest free loan for them.

 

I was in default from 2009-2012, and didn't file any of my taxes because I knew I would get returns every year that would be offset for my loans. When my offset cleared, I filed my 2010, 2011, and 2012 taxes all at the same time, and got returns for all of them (almost $3000).

Edited January 10, 2014 by scvbd99

[scvbd99]

Thanks for the information and advice. I'm going to contact the coolection agency I'm dealing with and see if there is anything they can or will do. Appreciate it much.

 

Thanks for the information and advice. I'm going to contact the coolection agency I'm dealing with and see if there is anything they can or will do. Appreciate it much.

Good.

 

If you want to, let me know what they said. Let me know if you have more questions. No matter what, if you know for sure that you are owed a return on your taxes (i.e., you know for sure you owe the IRS nothing), make sure you call (800) 304-3107 before filing any other tax returns. If that number tells you that nobody is offsetting your taxes, then you're good to go.

 

Also, it might be nice to get the info from you about your loan holder/collection agency's policy about tax offsets. We could start a thread that lets people know the different policies.

[FreeaAndClear]

Hi Scv,

 

I called the number and it said I had one offset. It then listed the tax return and amount that was offset last year. It didn't say that I have anything coming up for this year but it also didn't say it had been lifted. Does this mean it's gone now?

 

As a refresher, I completed my rehab last November. I'm hoping that I'll get my refund this year.

 

If there is a current offset I place, does the message explicitly state so?

 

Thanks!

[scvbd99]

Freedom,

 

You completed rehab in Nov 2013, and it has been picked up by a new lender? And you have no other defaulted student loans?

 

If so, then you should call the people you rehabbed with, and find out if and exactly when they sent notice to the Dept of Treasury to lift the offset. They are required to give you the information, so if they resist, tell them you'll get the federal ombudsman involved if they don't get you to a supervisor who will answer. If they don't, then by all means contract the ombudsman, and make your case. The ombudsman will usually call you within a couple of days of your online complaint.

 

I'm betting that if you rehabbed any and all loans, and they were picked up by a new lender, then the entity you rehabbed with sent in the info to the Dept. of Treasury to decertify your offset.

 

Then, try calling the 800 number again in a couple of weeks when the Dept of Treasury will be all set for 2013 tax season. The IRS is projecting that it won't start processing taxes until January 30th, so the Dept of Treasury is probably still in 2012 mode until then when it comes to the automated number.

[FreeaAndClear]

No other loans in default. (yay!) loans are already picked up, auto debit is set up and the second payment should come out soon.

 

I haven't asked the CA if they lifted the offset. Frankly, I hadn't even thought about it till you brought it up. I'm fortunate that it really won't be terrible if they offset one more time but I'd rather put the extra $ towards my higher interest private loans. Since I might need to call them soon to ask them to remove the old trade lines, I'll probably leave it alone for now.

 

I'll try the automated number next month and see if it's updated.

 

Thanks again!

[xelda]

I'm just going to add this because no one else has suggested it yet: For anyone who's worried about a tax offset, you should adjust your withholding so that you DON'T get a refund. Sure, it's nice to get a big chunk of money deposited once a year, but it's money that should have been yours all along so why not have it divided into smaller amounts per paycheck. If you are living paycheck to paycheck, an extra $50-$100 per month makes a big difference.

 

People talk about how the refund is like an interest-free loan you're providing the government, which is true. You do lose out on investment opportunities. But if you have other current debts, it's costing you MORE in interest waiting a whole year to make one large payment instead of paying smaller amounts every month.