My wife and I both qualify for IBR and PSLF. Married filing jointly puts us at $650 monthly payments while separately makes our payments about $80. So since after 10 years the remaining balance is gone it’s in our best interest to make the payments as low as possible.

Now this year filing taxes like this will cost us $1400 in taxes. This is from losing out on childcare expenses and loan interest.

So since IBR is based on the prior year. Like we just filed both our taxes and paid $330. Once we use that information for this year (2015). So next year when we file taxes we file as separate again. Once that is completed and we give that to the DOE can we refile 2014 as married jointly and get our $1028 refund? Plus the $330 we paid for the almost $1400 back?

I asked my tax advisor and she sees no issue as you can refile for 3 years. I spoke to the loan person at DOE and they didn’t know but said they “advised against it”. That’s purely because he didn’t know, I spoke to two different people and none knew if it would matter.

I don’t care about “morale” or anything like that. I want to know if what I’m describing is legal? If it is I will do it if it’s not I won’t. Does it matter? If they only use the current year can I just keep refiling each year after the New Years taxes are done?

I hope I’m being clear on the matter. Thank you for your time. If there is any information that is clear on this please give me the link.

Does anyone have any idea on who I could speak to about this? Since we plan on doing this for the next 10 years I would like to know the answer ahead of time. I dont want to get 10 years down the road and find out that this was illegal or that I get hit with penalties or something.

This year is $1,400 we lose out on doing are taxes this way. That is what we know without even doing our full jointly taxes I am sure we are missing out on other deductions that would give us back even more money. Assume thats for ten years and we are looking at missing out on $14,000 over the 10 year period.

I would be willing to pay for this information and to know exactly how the DOE works. If I refile this year after next years is done and turned in will it have any effect on the loans?

Thanks again.

Officially it’s illegal the question is will you get caught.  Similar to the IRS the DOE will randomly pull files to check up on applications.  But they do this with a very small percentage.

Any time your situation changes you are required per your Master Promissory Note to reapply with your new situation.  This would include filing status changes.  And being linked to the government the DOE would have record to IRS returns.

So if it’s a simple black or white is it legal, the answer is no.  Usually what you are describing is not what is researched but rather family size as you can often times claim people with no proof asked for that is different than the number of people on your tax return.  However if the DOE sees a red flag they have every right to investigate.  And refiling every year in my opinion would through up more of a red flag than say having no job one year getting a $0 payment getting a job 6 months later and not refiling (as you should have) right away but instead waiting till your annual recertification. 

I would go beyond advising against it, I would simply tell you to not do it and stick within the confines of the program no matter how inconvenient they may seem.

Leaving aside the legalities (well it doesn’t seem legal on its face but that’s just my gut reaction) and ethics, this seems potentially penny-wise and pound-foolish. No one knows exactly how comprehensive the 10-year PSLF review will be when it happens, but it seems to me you’re potentially putting that very large pot of money at risk over $14,000. Me and my wife are in the same boat, we both do married filing separately and take the tax hit because, on balance, it saves us money every year and we’re counting on PSLF to wipe out our loans at the end, which is worth a lot more than the tax hit we take in the meantime. But it seems to me that if you’re asking the govt to forgive a very large debt at the end of 10 years, and the govt in the course of reviewing your eligibility for PSLF finds out that you’ve been double-filing taxes every year to duck your full IBR hit/maximize your tax refund, well you may not get PSLF at the end of it. Just my two cents though.

Tax law permits the filing of amended returns in specific situations.  To my knowledge, the issue is not addressed by the rules governing income driven repayment plans.

As for who to hire, there are a number of excellent tax professionals (typically CPAs but not always), but don’t expect them to know the details of the loan programs.