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I received income in the form of student loan repayment in…

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Hello, I received income...

Hello, I received income in the form of student loan repayment in 2014 for a sum of $20,000 and 2015 for the same amount. I did not pay taxes on that loan repayment in those years. I also received similar payments in 2015 & 2016 however taxes were paid for both of those years. Due to the hospital I am employed by being bought by a larger national hospital chain they will no longer honor the final payment scheduled for 2018 ($100,000 total over the contract) and have now asked me to pay taxes on the untaxed amount by the end of 2018. Now that I am at a higher tax bracket and will be paying more for taxes my question is 1) Is that legal, i.e. its been at least two years since taxes were paid and 2) if this is correct tax law is there anyway to pay the taxes based on my 2014 and 2015 wages as this would be much less (I was still in residency in 2014) and was lower pain in 2015 than I am currently.

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Submitted: 4 months ago.Category: Tax
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1/5/2018
Tax Professional: Lev, Tax Advisor replied 4 months ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,858
Experience: Taxes, Immigration, Labor Relations
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1) Is that legal, i.e. its been at least two years since taxes were paid and

The issue here is that you are cash based taxpayer - as most of us are - and income is recognized when it is constructively received.
See here

https://www.law.cornell.edu/cfr/text/26/1.451-2

For income tax purposes, the doctrine of constructive receipt is used to determine when the taxpayer should include into gross income certain amounts.

So as that income was received during 2014 and following years - it MUST be reported on these years tax returns.
If the company recorded that as a loan to you in order to avoid taxable income - that is not correct and that what the new employer is trying to correct.
2) if this is correct tax law is there anyway to pay the taxes based on my 2014 and 2015 wages as this would be much less (I was still in residency in 2014) and was lower pain in 2015 than I am currently.

Th correct way - to adjust your income for each of these prior tax years and make corrected W2 forms - so you will be able to amend all your prior tax returns.

That will likely trigger additional penalties for you and for your employer because of unpaid employment taxes.

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Customer reply replied 4 months ago
I have a written contract that shows not only the disbursement amounts but the amortization schedule when they will be paid back. So the student loan reimbursement was actually a loan from the original hospital to me, where not only am I paying taxes on that loan (in 2016 and 2017) but also paying the original hospital interest. when reviewing my W2 at the end of the year I was taxed on 22,600 when they added this to income, and then took this away as deductions. for example each 2 week pay period they would add $854.12 into my gross pay, and then take the $854.12 out as a deduction totaling roughly $22,600 at the end of the year. So am I paying taxes on a loan?
Customer reply replied 4 months ago
Sorry would love to talk but I just put my twins down to bed
Tax Professional: Lev, Tax Advisor replied 4 months ago

The loan itself is NOT taxable income.

However - what makes me to worry - you did not ever mention in your original statement that was a loan...

I just worry why?
That must be a true loan - with full understanding and expectations of both parties that loan will be paid back.

So if you agree that was a bona fide loan - you just need to pay back that loan - and will NOT report that amount as your taxable income.

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