Recent Feedback
I just got a letter from the IRS saying the student loan interest I declared in 2008 did not match what had been reported to them therefore I need to pay $175 tax plus $10 interest. First of all, I am the parent and my daughter is a student. I have a parent plus loan for her and she has a stafford loan but I was making all the payments on both loans in 2008.I have determined what happened. Without paying a lot of attention, I deducted the interest on the stafford loan without realizing the loan company would report the "interest paid" on my daughter's behalf rather than me since her SS# XXXXX XXXXX the loan.Here is my question: If I provide the IRS documentation (1098E) showing the interest I deducted and show it was my daughter and I was making the payments; will I be able to negate paying the tax and interest? If not, should I just pay the tax and have my daughter file an amended 2008 return and show the interest on her return?
Optional Information: State/Country relating to Question: Texas Already Tried: nothing...just got the letter from the IRS yesterday.
Chat Conversation Started
Did you claim your daughter as a dependent in the current year? If you did, then you can claim the Staffford loan interest as a deduction. You need to respond to the IRS by providing them the documentation on your daughter's student loan and indicating she was claimed as your dependent. If you did not claim your daughter as a dependent, then you need to pay the tax and have your daughter file an amended return.
Experience: 27 years of preparing income tax returns - both personal and small business
What Happens Now?Your chat has ended, but you can still work with your Expert to get an answer to your question if you have not yet received one.Come back to this page at any time to see additional information from your Expert. You will also receive an email when your question is updated. If you want to send a message to your Expert, use the box below.If you have already received a satisfactory answer to your question, click the Accept button above. Experts are credited for each accepted answer they provide.
If the Stafford Loan is solely in the daughter's name, the mother cannot deduct the interest, even if she claims the daughter as a dependent because she is not legally liable for the loan. If she can prove to the IRS that she is legally liable to payback the loan, she can deduct the interest. This is on page 44 of Pub 970.
http://www.irs.gov/pub/irs-pdf/p970.pdf