I had a student loan forgiven and paid taxes on it, does the cosigner have any tax obligations reporting or otherwise?

Forum|Forum|6 years ago
June 6, 2019
3 replies
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We both received a tax form explaining the situation (error on the original loan provider's end) and I received a check "to cover taxes", but the check covered my taxes with roughly 50% of it remaining. We're trying to find out if this remainder is to be used on their taxes (IE: they're required to file/pay) or if it's simply a remainder.

nkesterAuthor

We both received identical forms. I've also had them ask their tax person and they don't think I need to worry having had paid my full amount. They said that should the IRS inquire, then let them know that I paid the amount listed.

ToddL

Employee

Did both of you get a Form 1099-C? For the full amount or for and equal share of the total?

ToddL

Employee

Since the co-signer was legally responsible for the debt and received a Form 1099-C, then it should be report on the co-signer's tax return.

Whether or not this results in taxable Cancellation of Debt income will depend on whether the co-signer qualifies for any exemption or exclusion.

See:

Is cancelled, forgiven, or discharged debt taxable?

czagara

This answer is incorrect. The co-signor has no accretion of wealth. See h Landreth v. Comm'r of Internal Revenue, 50 T.C. 803 (U.S.T.C. 1968) and https://www.irs.gov/pub/irs-wd/02-0024.pdf

Hal_Al

Employee

The loans are not considered taxable income so you do not need to include the 1099-C on your return.

The American Rescue Plan Act includes a provision temporarily modifying the tax treatment of forgiven or discharged student loan debt. Specifically, the law excludes from gross income any qualifying student loans that are discharged between Dec. 31, 2020, and Jan. 1, 2026. During this period, forgiven student loan debt won’t be subject to federal taxation.

How will a student loan payment count adjustment affect my taxes?

https://studentaid.gov/help-center/answers/article/will-idr-payment-count-adjustment-impact-taxes

https://turbotax.intuit.com/tax-tips/college-and-education/can-debt-forgiveness-cause-a-student-loan-tax-bomb/L4hoHzaq2