I got a student loan covid refund included amounts paid in 2020-2021. Now my interest for 2020-2021 was corrected and a new 2021 1098-E was mailed to me.

[cmarchet45]

Do I have to amend taxes for 2021? (and 2020?). It is a small amount but will change my taxes by $12. Note that it was not changed until 2022.

[Cynthiad66]

If you are absolutely sure that your taxes will only change by $12 then you do not have to amend.  The amount is considered de minimis by the IRS.  Meaning that it is too small for processing.

[cmarchet45]

Ok thanks. I will redo the taxes once more for 2021 to be sure. What amount is not consider too small?

Also, my interest changed for 2020 as well which will most likely change my taxes more for that year, to be determined.  I only got the 2021 mailed out to me but I looked myself and 2020 was changed/corrected also. Do I have to redo/amend 2020 if the amount of tax liability is higher or is that considered too long ago.  

     thank you, Carol (cmarchet45)

[BrittanyS · Accepted solution]

Unfortunately, there is not an exact dollar amount for what is too low of an error that you will need to correct.  However, as Cynthiad66 stated, for an amount as low as $12, the IRS will likely not pursue an audit because it would cost them more to pursue the audit than it would cost to dismiss the change.  

You can still file an amended return for the 2020 return electronically.  Any return older than 2020 can be amended, but it needs to be filed by mail.  

To amend your return in TurboTax Online, follow these steps:

1. Sign in to TurboTax
2. On the home screen, scroll down to Your tax returns & documents and select the year you want to amend
3. Select Amend (change) return, then Amend using TurboTax Online
   • If you're told to amend your return via TurboTax Desktop, follow the steps for TurboTax CD/Download below instead
4. On the screen OK, let's get a kickstart on your amended return, select the reason(s) you're amending and Continue
5. When you reach Here's the info for your amended federal return, select Start next to the info you need to change
6. Continue through the screens, make the changes you need to make, and carefully answer the remaining questions to finish amending your return

For more information on amending returns, see the link below:

How do I amend my federal tax return?

[cmarchet45]

thanks, will this work to amend the state return also?

[TeresaM]

Yes, after you amend the federal, TurboTax will ask if you wish to amend the state as well. Select Yes and then the updated information will transfer from the federal return. 

[cmarchet45]

      Just want to be absolutely sure in this student loan interest refund discussion. The student loan interest refunded for (2020-2021) in 2022 has to be adjusted for the prior years interest claimed via amended taxes.

    The student loan interest refunded is NOT to be included in 2022 income, correct? Some have posted this instruction which I believe is incorrect.       thanks again, cmarchet45

[DianeW777 · Accepted solution]

To be clear, if you used the student loan interest as a deduction on your federal (and possibly state) return for the earlier years AND you were refunded part of that interest there is action to take on your part.

1. Amend your return(s) to see if there is a tax difference (federal and state)
2. If there is an increase in your tax due, file the amendment(s) and pay the tax
   1. How do I amend my federal tax return for a prior year? (as provided by our tax expert @BrittanyS)

Keep the tax documents with your tax return file including the corrected Form 1098-E.

Do not include this adjustment on your 2022 tax return.

@cmarchet45 

[cmarchet45]

     I understand all recommendations so far.

    Another thought-- What about the interest we would get refunded if the Biden debt forgiveness does pass and the money comes through. I know the income is not supposed to be taxed but if we amend our past taxes soon for refunded interest, what happens if this interest is also taken back off the past 1098-Es?  So millions of people would have to go back and amend, potentially a second time for those of us who got the covid refund and are supposed to amend now/soon? 

     Does anyone have experience with the current/past debt forgivenesses such as the PSLF (public service loan forgiveness)?   How was the forgiven interest treated?       thanks,  cmarchet45

[MichaelG81]

For student loan forgiveness, with the TCJA enacted through December 2025, student loans forgiven are usually sent a 1099-C. However, it isn't reportable due to tax law changes up to that timeframe for student loan discharges and forgiveness. Topic No. 431 explains more in detail. That is on the federal level; depending on the state, they are all different and may be taxed as income. For amending and refund questions DianeW777 makes a very good point about amending.

@cmarchet45 

[cmarchet45]

      Thanks, but yes I know all that. The discussion is about interest, not income.  So not sure how this will all work out but interest was paid previously on the money which could get returned for previous years if debt forgiveness goes through. Will see later. However, I will not amend my taxes until the debt forgiveness gets decided and if passes, see if those 1098-Es change again!  (The debt forgiveness wouldn't even pay for all the interest I have paid over the years).  

    Also have a quick question. Can you amend the state taxes in Turbo Tax without doing the federal?  One year I would definitely not need to do federal for refunded interest but maybe state. I will try to redo the state taxes myself (MA) for those years first to see.      thanks again, cmarchet45

[KrisD15]

Here is why we talk about income. 

If you pay interest on a credit card, the IRS could not care less. 

But when you pay interest on a student loan, the IRS lets you use that interest payment to adjust your income. 

So if in 2021, you made 45,000, and paid 2,000 in student loan interest, you 'adjusted" your income down to 43,000.

If the interest was "refunded" to you, you don't claim income because you got your interest payment back, you claim income because you need to claim that "adjustment" back. 

I am surprised that they issued to you a corrected 1098-E for 2021, I would have guessed they would send you a 1099-MISC for 2022, but this is all a very new process and there are no real instructions for what to do. 

The IRS does get copies of the 1098-E so I wonder if they will expect Taxpayers to amend.