Tax return garnished for student loans

[dncr]

What is the name of your state? California

Sorry if this is the wrong area for this, wasn't sure exactly where to put it and didn't see it in the FAQ's!

Husband and I got married this year, so will be filing our first return together next year. His returns are currently being taken to pay on his defaulted student loans. I know, bad, but it's a result of some things that were out of his control and we're working on getting them up to date.

1. I take it if we file jointly, our return will still get taken?

2. What if we file as married filing separately? Are we allowed to do that?

Thanks for any help you can offer!

 

[SMRFLD]

Tax Refund

In New York, there is a form to fill out for the spouse that reimburses a spouse half of the tax refund that was confiscated by the taxman. I wasn't aware of this - the State of New York advised of the option when we received the notice of our entire State of New York tax refund confiscated. I know it may not apply in CA, but I'd bet a similar option exists for you.

 

[abezon]

On the federal return, you should file an injured spouse form (88xx). This informs the IRS that they should only take the amount of the joint return allocable to your husband. You won't know how much money you'll get for 2 months or so, but it's the best way to maximize your total refund & put some of the money in your pocket. I'm sure CA has a similar form.

You should talk to the DOE about how to get your loans out of default. Some people I know of have made 3 monthly payments to get their loans out of default, then started a new payment plan (often the income-contingent plan).

You can also adjust your W-4s so that less taxes are taken from his paycheck and more are taken from yours. You receive the same take-home pay, but more of the refund is yours at the end of the year. You can then use the refund to make voluntary payments & get out of default. If that doesn't work easily, adjust your W-4s until you owe a small amount at the end of the year. Then there's no refund to take.

 

[dncr]

Some great advice there, abezon! Thank you!