Filing taxes for income based loan repayment

[MiaMia14]

I have heard that you need to file a tax return if you want to pay nothing for the first year of residency on the income based loan repayment...that they use the previous year's tax return to determine what you pay and since I made no money 4th year I wouldn't have to pay anything for the first year. The problem is, I am not exactly sure how to file taxes when I didn't make anything. I tried to use turbotax but I got all the way to the end and it said I couldn't file because I was below the minimum. First of all just want to verify with someone who knows if it's true that if you file you can basically pay nothing the first year. Also, if anyone knows exactly how to do that I would greatly appreciate any help. Real life things....

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[ksharp33]

I have heard that you need to file a tax return if you want to pay nothing for the first year of residency on the income based loan repayment...that they use the previous year's tax return to determine what you pay and since I made no money 4th year I wouldn't have to pay anything for the first year. The problem is, I am not exactly sure how to file taxes when I didn't make anything. I tried to use turbotax but I got all the way to the end and it said I couldn't file because I was below the minimum. First of all just want to verify with someone who knows if it's true that if you file you can basically pay nothing the first year. Also, if anyone knows exactly how to do that I would greatly appreciate any help. Real life things....

I have the same exact question.

 

[link2swim06]

http://budgeting.thenest.com/file-taxes-income-28513.html
http://www.irs.gov/pub/irs-prior/f1040ez--2014.pdf

It should be pretty simple. Fill out the form. Follow the instructions.

 

[organdonor]

Yes when it comes time to calculate your loan payments they will ask you for your AGI (adjusted gross income) from your last years tax return. It is CRITICAL that you file your taxes as a fourth year med student if you want your loan payments to be manageable as an intern.

If you have not filed taxes, in order to calculate your loan payment they will take your monthly income (as an intern) and multiply that by 12. This is a huge difference.

If you filed, payments calculated with an income of 0 ( or damn close to it). If you didn't file, payment calculated with an income of $50,000. Which do you prefer?

Along the same thread, it is equally important to file taxes as an intern as your first tax return will only reflect 6 months of income. So it's the difference of your payments calculated with $25000 of income or $50000 of income. Without extenuating circumstances (spouse with income, etc) most residents should be able to get a loan payment of $0 if they want to for 2 years IF YOU FILE YOUR TAXES and you won't if you don't.

I know of at least one resident at my program who didn't file taxes and got burned this way hard. He's making payments of $1000 a month while mine are 0. All because I filed and he didn't.

 

[DrBowtie]

I have heard that you need to file a tax return if you want to pay nothing for the first year of residency on the income based loan repayment...that they use the previous year's tax return to determine what you pay and since I made no money 4th year I wouldn't have to pay anything for the first year. The problem is, I am not exactly sure how to file taxes when I didn't make anything. I tried to use turbotax but I got all the way to the end and it said I couldn't file because I was below the minimum. First of all just want to verify with someone who knows if it's true that if you file you can basically pay nothing the first year. Also, if anyone knows exactly how to do that I would greatly appreciate any help. Real life things....

Late now, but paper form.

 

[sazerac]

I know of at least one resident at my program who didn't file taxes and got burned this way hard. He's making payments of $1000 a month while mine are 0. All because I filed and he didn't.

PAYE only takes 10% of your discretionary income (income beyond 150% of poverty line). Since your friend is making about $140,000 a year, I'm sure he can afford chipping in $1,000 a month from his 5 figure monthly income.

 

[Winged Scapula]

PAYE only takes 10% of your discretionary income (income beyond 150% of poverty line). Since your friend is making about $140,000 a year, I'm sure he can afford chipping in $1,000 a month from his 5 figure monthly income.

What resident is making $140K per year?

 

[sazerac]

What resident is making $140K per year?

I know. What resident pays $1,000 a month in any payment plan based on income? I wonder if he has a trust fund, or a wife who is a PA or something.

 

[ksharp33]

Yes when it comes time to calculate your loan payments they will ask you for your AGI (adjusted gross income) from your last years tax return. It is CRITICAL that you file your taxes as a fourth year med student if you want your loan payments to be manageable as an intern.

If you have not filed taxes, in order to calculate your loan payment they will take your monthly income (as an intern) and multiply that by 12. This is a huge difference.

If you filed, payments calculated with an income of 0 ( or damn close to it). If you didn't file, payment calculated with an income of $50,000. Which do you prefer?

Along the same thread, it is equally important to file taxes as an intern as your first tax return will only reflect 6 months of income. So it's the difference of your payments calculated with $25000 of income or $50000 of income. Without extenuating circumstances (spouse with income, etc) most residents should be able to get a loan payment of $0 if they want to for 2 years IF YOU FILE YOUR TAXES and you won't if you don't.

I know of at least one resident at my program who didn't file taxes and got burned this way hard. He's making payments of $1000 a month while mine are 0. All because I filed and he didn't.

April 15th has passed, I guess it is too late for me to file now?

 

[gutonc]

April 15th has passed, I guess it is too late for me to file now?

You can always file late. You'll have to pay a penalty in addition to taxes owed. But if you don't owe any taxes, I'm not sure what the penalty would be. Even if you did have to pay a penalty though, it's probably going to be more than made up for what you'll save going forward.

 

[ksharp33]

You can always file late. You'll have to pay a penalty in addition to taxes owed. But if you don't owe any taxes, I'm not sure what the penalty would be. Even if you did have to pay a penalty though, it's probably going to be more than made up for what you'll save going forward.

Thanks for the info. Yeah, I don't owe any taxes.. Just wanted to file to take advantage of one of the income based repayment plans.

 

[organdonor]

What resident is making $140K per year?

He isn't. He has a wife with a sizable income and I think he moonlights. Maybe he exaggerated I don't know. Point still stands.

 

[Winged Scapula]

He isn't. He has a wife with a sizable income and I think he moonlights. Maybe he exaggerated I don't know. Point still stands.

GOTCHA. I was reading on my phone and was confused about the monthly payment and why it was so high.

 

[the argus]

I have heard that you need to file a tax return if you want to pay nothing for the first year of residency on the income based loan repayment...that they use the previous year's tax return to determine what you pay and since I made no money 4th year I wouldn't have to pay anything for the first year. The problem is, I am not exactly sure how to file taxes when I didn't make anything. I tried to use turbotax but I got all the way to the end and it said I couldn't file because I was below the minimum. First of all just want to verify with someone who knows if it's true that if you file you can basically pay nothing the first year. Also, if anyone knows exactly how to do that I would greatly appreciate any help. Real life things....

They closed this loophole in the past couple years. It doesn't matter anymore whether you file taxes or not, because they now have a new question on the form.

http://www.ifap.ed.gov/dpcletters/attachments/GEN1222AttachFINAL1845dash0102Expires20151131.pdf
"Section 5 Alternate Documentation of Income: To be completed if (1) you did not file a federal income tax return for the two most recently completed tax years, (2) your AGI from your most recently filed federal income tax return does not reasonably reflect your current income (due to circumstances such as the loss of or change in employment), or (3) your loan holder(s) informed you that alternative documentation of income is required."

Basically, if you are filling out the request form after you have started residency, which most are since their 6 month grace period extends into PGY1, you are *technically* required to document your new salary. There has been a lot of discussion (you can search older threads and other sites) about whether this is enforced, if navient would actually notice when reviewing your request, or if you could get in trouble for fraud if you don't disclose it. I don't know the answer to those questions, but apparently they did this specifically to close the $0 PGY1 payment (and subsequent half salary PGY2 payment).

 

[link2swim06]

He isn't. He has a wife with a sizable income and I think he moonlights. Maybe he exaggerated I don't know. Point still stands.

I wouldn't really say he is screwed. If anything it's saving him money in the long run by paying down his loans early.

I have routinely been paying $800-900 a month during residency on my loans and have been living very comfortably.

I'll agree it's nice when it is not a required payment.

 

[ksharp33]

They closed this loophole in the past couple years. It doesn't matter anymore whether you file taxes or not, because they now have a new question on the form.

http://www.ifap.ed.gov/dpcletters/attachments/GEN1222AttachFINAL1845dash0102Expires20151131.pdf
"Section 5 Alternate Documentation of Income: To be completed if (1) you did not file a federal income tax return for the two most recently completed tax years, (2) your AGI from your most recently filed federal income tax return does not reasonably reflect your current income (due to circumstances such as the loss of or change in employment), or (3) your loan holder(s) informed you that alternative documentation of income is required."

Basically, if you are filling out the request form after you have started residency, which most are since their 6 month grace period extends into PGY1, you are *technically* required to document your new salary. There has been a lot of discussion (you can search older threads and other sites) about whether this is enforced, if navient would actually notice when reviewing your request, or if you could get in trouble for fraud if you don't disclose it. I don't know the answer to those questions, but apparently they did this specifically to close the $0 PGY1 payment (and subsequent half salary PGY2 payment).

Well, that is unfortunate.

 

[Mass Effect]

They closed this loophole in the past couple years. It doesn't matter anymore whether you file taxes or not, because they now have a new question on the form.

http://www.ifap.ed.gov/dpcletters/attachments/GEN1222AttachFINAL1845dash0102Expires20151131.pdf
"Section 5 Alternate Documentation of Income: To be completed if (1) you did not file a federal income tax return for the two most recently completed tax years, (2) your AGI from your most recently filed federal income tax return does not reasonably reflect your current income (due to circumstances such as the loss of or change in employment), or (3) your loan holder(s) informed you that alternative documentation of income is required."

Basically, if you are filling out the request form after you have started residency, which most are since their 6 month grace period extends into PGY1, you are *technically* required to document your new salary. There has been a lot of discussion (you can search older threads and other sites) about whether this is enforced, if navient would actually notice when reviewing your request, or if you could get in trouble for fraud if you don't disclose it. I don't know the answer to those questions, but apparently they did this specifically to close the $0 PGY1 payment (and subsequent half salary PGY2 payment).

Not sure about any of what you're saying here, but I can tell you that I signed up for IBR. I answered every question truthfully and did not file a tax return last year, but did put under current salary my PGY 1 salary. I am paying $0 as a PGY 1 since I made no income last year.

 

[lockjaw]

They closed this loophole in the past couple years. It doesn't matter anymore whether you file taxes or not, because they now have a new question on the form.

http://www.ifap.ed.gov/dpcletters/attachments/GEN1222AttachFINAL1845dash0102Expires20151131.pdf
"Section 5 Alternate Documentation of Income: To be completed if (1) you did not file a federal income tax return for the two most recently completed tax years, (2) your AGI from your most recently filed federal income tax return does not reasonably reflect your current income (due to circumstances such as the loss of or change in employment), or (3) your loan holder(s) informed you that alternative documentation of income is required."

Basically, if you are filling out the request form after you have started residency, which most are since their 6 month grace period extends into PGY1, you are *technically* required to document your new salary. There has been a lot of discussion (you can search older threads and other sites) about whether this is enforced, if navient would actually notice when reviewing your request, or if you could get in trouble for fraud if you don't disclose it. I don't know the answer to those questions, but apparently they did this specifically to close the $0 PGY1 payment (and subsequent half salary PGY2 payment).

When I started residency, submitted a letter from my program that documented my salary, plus a copy of my contract since my taxes would not accurately represent my income. I was told this was not sufficient and that I needed to send my taxes in as well, so I did and then I was promptly assigned an IBR payment of $0 for my first year of residency. Tried to be honest and represent my true income, but I can't say I was sad that the government chose to ignore that and base my payments off my taxes after all.

 

[maxxor]

When I started residency, submitted a letter from my program that documented my salary, plus a copy of my contract since my taxes would not accurately represent my income. I was told this was not sufficient and that I needed to send my taxes in as well, so I did and then I was promptly assigned an IBR payment of $0 for my first year of residency. Tried to be honest and represent my true income, but I can't say I was sad that the government chose to ignore that and base my payments off my taxes after all.

Who was your servicer? I had the opposite experience and had a full payment during PGY 1.

I had Myfedloan, Navient, and GreatLakes all assign full payment despite having a zero 2013 tax return.

 

[lockjaw]

Who was your servicer? I had the opposite experience and had a full payment during PGY 1.

I had Myfedloan, Navient, and GreatLakes all assign full payment despite having a zero 2013 tax return.

Currently my loans are with Aspire Resources, although I think Great Lakes was my servicer at the time when I first started IBR.

 

[Bacchus]

I wouldn't really say he is screwed. If anything it's saving him money in the long run by paying down his loans early.

I have routinely been paying $800-900 a month during residency on my loans and have been living very comfortably.

I'll agree it's nice when it is not a required payment.

I agree. Chipping away is chipping away regardless that the interest is ballooning. I afford ~500 a month and am able to live well. If I wasn't contributing to a retirement plan yearly I'd be able to double the amount I'm paying.

As a resident you are paid very well. Many people don't feel this way because of the $/hour rate and that is true, but we're still pretty high earners (or maybe my PGY salary is skewed...59,000 next year ).

Just file for the IBR, use your intern income, and pay some debt.

 

[Bacchus]

When I started residency, submitted a letter from my program that documented my salary, plus a copy of my contract since my taxes would not accurately represent my income. I was told this was not sufficient and that I needed to send my taxes in as well, so I did and then I was promptly assigned an IBR payment of $0 for my first year of residency. Tried to be honest and represent my true income, but I can't say I was sad that the government chose to ignore that and base my payments off my taxes after all.

Weird. I filled out the application for MyFedLoan, stated there was a major change in my income, and sent off my 2-week income statement and did the math for them. It couldn't have been easier.

Tip for this year: make sure you don't ignore when they say the IBR recert is due. I dallied a bit and had to go into forebearance for a month :\

 

[TheSportsMedDoc]

If you did not make any money you do not even have to file a tax return. Simply fill out this years form and send it in to the company for $0 payments....

Do NOT send in a paystub as you can't present an "adjusted gross income", therefore they will charge you 10% (PAYE), 15% (IBR) of your intern income over 150% of the federal poverty line (have to look on the internet to find out what this cut off is as it is based on state and family size, but for year 2 I'll still be paying $0/month due to deductions).

 

[RangerBob]

If you did not make any money you do not even have to file a tax return. Simply fill out this years form and send it in to the company for $0 payments....

Do NOT send in a paystub as you can't present an "adjusted gross income", therefore they will charge you 10% (PAYE), 15% (IBR) of your intern income over 150% of the federal poverty line (have to look on the internet to find out what this cut off is as it is based on state and family size, but for year 2 I'll still be paying $0/month due to deductions).

Unless you're doing something unusual, you can't get $0 payments without a $0 (or low) tax return, or stating you have a $0 (or low) income. As others have mentioned, many servicers now ask for your AGI the first time you file for IBR/PAYE--others don't. It seems to be inconsistent even for the same servicer. Some also ask and then calculate the payment wrong.

Either way--budget for and prepare to be making the full IBR/PAYE payment during your intern year. It's much better than doing the opposite and hoping for that $0 payment (which will at some point in residency become a full payment anyway)