Superseded Return Didn't Supersede

[NCperson]

@cparke3 - I thought of something else that may maintain your current MFS approach

Look how the DOE FAQ is worded: 

• To be eligible, your annual income must have fallen below $125,000 (for individuals) or $250,000 (for married couples or heads of households)

it doesn't say anything about 'filing status' in the strickt view of taxes and the IRS.  it just says 'married couples' and it doesn't use the word "filing single" either; it says 'individuals'; the IRS would state "filing single", not "individuals". 

The words 'filing status' are not used in the FAQ. 

You two are married and earned less than $250,000.  As written, it appears you qualify even if you file MFS. 

Remember, this is driven by Dept of Education and not the IRS....

maybe best to hold off doing anything until late sept / early Oct - still time to file by Oct 15 and let the DOE put more 'meat on the bone' on their rules.

[cparke3]

For the FAFSA and student loan eligibility, it is true that MFS vs. MFJ makes no difference, both spouse's income is always deemed part of the household income.

But I will tell you the news media has been all over this issue already, and it is linking the income limits announced by President Biden with income tax filing status.  For example:

    https://studentaid.gov/debt-relief-announcement/

"To be eligible, your annual income must have fallen below $125,000 (for individuals) or $250,000 (for married couples or heads of households)"

    https://money.com/student-loan-forgiveness-who-qualifies/

"People with existing federal student loans who earn less than $125,000 a year are eligible for forgiveness. The cutoff for married couples filing jointly is $250,000."

    https://www.gobankingrates.com/loans/student/what-is-student-loan-forgiveness-income-limit-for-marri...

"When it comes to married people filing jointly on taxes, the maximum income limit is $250,000 for the household."

    https://www.cnbc.com/2022/08/24/heres-what-president-bidens-student-loan-forgiveness-means-to-your-t...

"Biden on Wednesday announced that he will forgive $10,000 in federal student debt for most borrowers, limited to borrowers making less than $125,000 per year, or $250,000 for married couples filing together or heads of households."

Part of the confusion is no doubt coming from the application of the existing rules of the, "income-driven repayment (IDR) plan" towards this new loan forgiveness program.  That program, as I understand it, utilizes income tax filing status (MFJ vs. MFS) to determine the payment amounts, and DOE has already said that if you participate in that program, they will use the income information you provided for it to automatically determine eligibility for this loan forgiveness program.   The provisions of the announcement for "Heads of Households", an income tax filing status classification, also hints that tax filing status is going to be a factor on eligibility for loan forgiveness. 

Obviously, nobody is quite sure yet because this was just announced, and no rulemaking has even been proposed yet, but like the previous years economic stimulus programs, these dramatic and highly unanticipated changes suddenly awarding thousands of dollars in benefits are disruptive to orderly tax planning, and, in that respect, unappreciated.

[NCperson]

@cparke3 suggestion: stick with the DOE announcments - they are the source

 https://studentaid.gov/debt-relief-announcement/

the press is interpreting...... and adding words that do not exist in the DOE official FAQs. 

[cparke3]

Yes, and the DOE announcement (seen above) is already making provisions for Head of Household filers getting the $250,000 limit, another big clue the MFS will be treated differently.

[Critter-3]

I believe that MFS and single will be treated the same  since the single is 1/2 of the married amount but until the situation are fleshed out and set in stone nothing is for certain.

[fanfare]

if you want change from MFS to file MFJ then the spouse that already filed should amend their return to include your income and withholding etc.

Then you will not have to file anything.

IRS was not allowing e-File of 1040-X when you go to change filing status but it appears they are relaxing these restrictions.

It may work now.

the processing time is the same for 1040-X whether e-File or paper, according to IRS.

Advantage of e-File is

-- it can't get lost in the mail.

-- you can't leave out required forms or schedules.

@cparke3 

[cparke3]

Closer reading of the rules does seem to indicate that the extended due date is not recognized for changing irrevocable elections, so it seems like there is no way anymore for me to properly file a superceding return to change the original return information.  Best chance at this point is filing a regular amended return, but IRS's current ridiculous processing delays (>9 months) make it seem pretty impossible that I could provide official verification of the amended return changes to the original return by year end.  One good sign is they now seem to be promising that forgiveness applications will be processed thru Dec. 31, 2023, which would give enough time for IRS to get these handled.

IRS accepted my e-filed amended return to change filing status from two separate MFS returns into one MFJ return, so at least in that scenario (where both spouse already filed), e-filing to change filing status seems to work now (so far).

I think it is very likely that DOE will utilize the IRS Data Retrieval Tool (DRT) to verify the student loan forgiveness applications, as they already use that for processing their Income-Driven Repayment (IDR) program applications.  That tool, however, doesn't normally report any amended return changes to DOE.  Have to hope they will also have a provision for manual review in cases like an amended return (and more particularly, pending amended returns that change the filing status and thus change the income limit for program eligibility).