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seawolf06
LSU Fan
Raleigh, NC
Member since Oct 2007
6754 posts

PSLF, Roth IRA and Married tax filing
We married in 2018, now need to determine how best to file our taxes.

My wife works at a hospital and has been working towards the PSLF program for about 3 years. I understand that she has to be on an income based payment plan in order to qualify. My understanding is that if we were to file jointly, her payment would increase significantly since I make much more than she does. It would increase so much so, that the PSLF would essentially be nothing as the loan would mostly be paid off ($200 -> $1k).

I thought I read that when getting married and filing jointly, she would have to move to a standard payment for 1 month, after which should could apply for a new payment plan at a lower payment that would still qualify for PSLF. Does anyone have experience with this?

To throw another wrinkle in the mix, I just read that if we file separately, we would not be able to contribute anything to our Roth IRA accounts. I'm sure we have already made contributions which would now be taxed, and could make future contributions to the Traditional IRA instead.

Does anyone have thoughts or advice before I seek out an FA?


hungryone
LSU Fan
river parishes
Member since Sep 2010
7930 posts

re: PSLF, Roth IRA and Married tax filing
Read up on PSLF....virtually no one is getting approved. Don't count on it. I've known about a dozen people in the last couple months who thought they qualified, had made the 120 qualifying payments in the proper repayment scheme, and were rejected anyway.


seawolf06
LSU Fan
Raleigh, NC
Member since Oct 2007
6754 posts

re: PSLF, Roth IRA and Married tax filing
quote:

Read up on PSLF....virtually no one is getting approved. Don't count on it. I've known about a dozen people in the last couple months who thought they qualified, had made the 120 qualifying payments in the proper repayment scheme, and were rejected anyway.


Thanks, we have been reading as much as we can and know it's been a CF so far for a lot of people.

She has kept documentation showing the eligible payments made and makes sure to re-file every year as required.

There's no telling what will happen in the next 7 years, but so far we can only go on what we know and what is in place today. I don't want to turn my back on the program just yet. If you have any learnings from your friends who were rejected, I'd love to hear them.


Teddy Ruxpin
LSU Fan
Austin, TX
Member since Oct 2006
32682 posts

re: PSLF, Roth IRA and Married tax filing
No, those stats are mostly bull shite because 1) No, they didn't do it right and 2) people were applying who couldn't have possibly done the 120 payments.
This post was edited on 1/9 at 5:27 pm


Teddy Ruxpin
LSU Fan
Austin, TX
Member since Oct 2006
32682 posts

re: PSLF, Roth IRA and Married tax filing
quote:

I thought I read that when getting married and filing jointly, she would have to move to a standard payment for 1 month, after which should could apply for a new payment plan at a lower payment that would still qualify for PSLF. Does anyone have experience with this? 


I've never heard of this.

Yes the best strategy to reduce payments is to file separately. Then, as you mentioned you will become ineligible for ROTH but you just backdoor it.

There are other issues with filing separately but if you make enough money as it is the things you lose you couldn't use anyways.
This post was edited on 1/9 at 5:33 pm


Teddy Ruxpin
LSU Fan
Austin, TX
Member since Oct 2006
32682 posts

re: PSLF, Roth IRA and Married tax filing
quote:

She has kept documentation showing the eligible payments made and makes sure to re-file every year as required. 


There is no "requirement" to file your PSLF every year. There is for your repayment plan which is a separate issue.

It's advisable to do the PSLF at least every year so you can keep accurate records of your qualifying PSLF payments.
This post was edited on 1/9 at 6:54 pm


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TheWiz
LSU Fan
Third World, LA
Member since Aug 2007
9682 posts

re: PSLF, Roth IRA and Married tax filing
I feel like I've read about this a couple of times on Whitecoat Investor. He makes it sound like it is almost a unicorn to accomplish PSLF. Just a total clusterfrick.


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seawolf06
LSU Fan
Raleigh, NC
Member since Oct 2007
6754 posts

re: PSLF, Roth IRA and Married tax filing
quote:

you just backdoor it.


Since reading about it, I found that all IRA contributions are limited when Married Filing Separately. Therefore a backdoor would not be possible, either.


Teddy Ruxpin
LSU Fan
Austin, TX
Member since Oct 2006
32682 posts

re: PSLF, Roth IRA and Married tax filing
quote:

Since reading about it, I found that all IRA contributions are limited when Married Filing Separately. Therefore a backdoor would not be possible, either.


Incorrect.

You will have a reduced tax deduction limit for traditional IRA if you file MFS. But, you aren't taking the deduction so why do you care? Contributions to a traditional IRA aren't limited by your filing status (please link me if I'm wrong). Therefore, you contribute to the traditional. The conversion to ROTH as we know doesn't have any of these limitations so now you have a fully funded Roth.

A supposed authority exactly on point for your reading

Btw if you file MFS in a community property state, shite gets weird. See IRS Publication 555. So weird in fact, if you file MFS as if you weren't in a community property state the IRS computers won't even notice and you'll get any money owed/due fast as usual. If you do file it correctly, the computers will flag ythe lower paid spouse's return and you have to go through a few months of back and forth with the IRS to educate them on the proper method. This is because you have to share evenly the income and taxes on your federal return if you live in a community property state and it won't match your W-2. So what happens is the person who pays more taxes will put less on their return and IRS won't flag that (how convenient), but when the lower paid person says they got taxed more than they did on their W2(which increases refund/lessens taxes owed), the flag hits and you will go through the appeal process.

Fun!

ETA: looks like you're in North Carolina so you're safe
This post was edited on 1/11 at 10:14 pm


macatak911
New Orleans Pelicans Fan
Metairie, LA
Member since Sep 2007
10536 posts

re: PSLF, Roth IRA and Married tax filing
quote:

We married in 2018, now need to determine how best to file our taxes.


Same boat here.....We file MFS because my monthly payment is $50 instead of $450. It's a bitch to do the taxes because of the community property allocation but family member is CPA so it's free.


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Ace Midnight
LSU Fan
Between sanity and madness
Member since Dec 2006
65602 posts

re: PSLF, Roth IRA and Married tax filing
quote:

No, those stats are mostly bull shite because 1) No, they didn't do it right and 2) people were applying who couldn't have possibly done the 120 payments.


Correct - you have to have the right kind of loans, be in the right kind of qualifying employment, be in the correct type of repayment plan, make 120 payments AND apply for forgiveness.

Most people fail at item 1 (right kind of loans). The absolute first people were not eligible until approximately October 2017.

FedLoanServicing has not done a great job, IMHO, to this point. Many, many folks have to have manual reviews that take months.

My best advice - file your employment certification form HELLA early and then work it down to get the correct number of payments applied. THEN, recertify every year (or sooner), until you get very close then recertify as soon as you make the final qualifying payment, then immediately apply for forgiveness.

That should work for more and more people going forward as a best practice.


Teddy Ruxpin
LSU Fan
Austin, TX
Member since Oct 2006
32682 posts

re: PSLF, Roth IRA and Married tax filing
I agree with all that.

One more thing to note: You have to still be in the job that is a qualifying job and keeping up payments when the forgiveness is actually processed.

So you could theoretically do the 120 payments, apply, and then quit the job 2 months later and not get the forgiveness because you left the qualifying job before they fully processed your application.

So ya, the system is ridiculous at times, you just have to educate yourself and stay on it.
This post was edited on 1/13 at 12:13 pm


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GeauxPack81
California Fan
Member since Dec 2009
9018 posts

re: PSLF, Roth IRA and Married tax filing
I've heard so many people talking about getting there student loans forgiven lately, particularly amongst medical students. I feel like alot of people are being told to just make minimum payments for 10 years and all their loans go away... What am I missing? If you make plenty enough money to pay your loans back, why are they being forgiven by the government?


Teddy Ruxpin
LSU Fan
Austin, TX
Member since Oct 2006
32682 posts

re: PSLF, Roth IRA and Married tax filing
quote:

What am I missing? If you make plenty enough money to pay your loans back, why are they being forgiven by the government?



Why wouldn't you take the best terms offered under a contract?


Ace Midnight
LSU Fan
Between sanity and madness
Member since Dec 2006
65602 posts

re: PSLF, Roth IRA and Married tax filing
quote:

I feel like alot of people are being told to just make minimum payments for 10 years and all their loans go away.


No - a lot of people are hearing this.

quote:

What am I missing?


PSLF explained

If you were advising someone else on which alternative to retire his or her student loans, wouldn't you want to know what the minimum payment required to accomplish this?



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GeauxPack81
California Fan
Member since Dec 2009
9018 posts

re: PSLF, Roth IRA and Married tax filing
quote:

Why wouldn't you take the best terms offered under a contract?


No, I get it from the students perspective. I don't get why the government would do that.


Teddy Ruxpin
LSU Fan
Austin, TX
Member since Oct 2006
32682 posts

re: PSLF, Roth IRA and Married tax filing
quote:

No, I get it from the students perspective. I don't get why the government would do that.



Because traditionally public sector jobs pay less. So if you want the best employees you need to provide an incentive for them to work public sector outside of some feeling of civic duty. Most do this by providing more holidays, a pension, strict hours where staying late isn't a common occurrence or other benefits.

However, what is considered "public service" is pretty broad and one could make plenty of arguments against that. Plus, like most federal programs, it applies nationally and to state and non-profit employees, which also could create adverse incentives in the aggregate.

For example,there are very capable attorneys in public jobs who could be making 150k more a year. You gotta do something to attract and retain them.
This post was edited on 1/13 at 3:14 pm


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GEAUXT
USA Fan
Member since Nov 2007
24636 posts

re: PSLF, Roth IRA and Married tax filing
quote:

Read up on PSLF....virtually no one is getting approved. Don't count on it. I've known about a dozen people in the last couple months who thought they qualified, had made the 120 qualifying payments in the proper repayment scheme, and were rejected anyway.


The key is not waiting until the end to apply. I finished residency 2 years ago and just in the last few months finally got those years of payments "certified". I had to resubmit the same form 10 separate times because they continued to reject it for no reason whatsoever.

You really need to recertify every single year just to make sure there are no surprises at the end.


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buckeye_vol
Ohio State Fan
Member since Jul 2014
30447 posts

re: PSLF, Roth IRA and Married tax filing
quote:

If you make plenty enough money to pay your loans back, why are they being forgiven by the government?
Well I’m pretty sure all of the qualified repayment plans are income based so person making a lot of money is still going to have to pay a lot back. But at the end of the day, if someone can pay some percentage less than what they would have paid, and they meet all of the requirements (public services, qualified repayments, meet payment minimums, etc.), why wouldn’t they regardless of how much they make?
This post was edited on 1/13 at 7:21 pm


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10
seawolf06
LSU Fan
Raleigh, NC
Member since Oct 2007
6754 posts

re: PSLF, Roth IRA and Married tax filing
quote:

You will have a reduced tax deduction limit for traditional IRA if you file MFS. But, you aren't taking the deduction so why do you care?


Thanks for the info!

Are you saying that I wouldn't take the deduction because I would be converting this to a Roth IRA?


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