President Biden has announced his three-part student loan forgiveness plan that aims to provide relief to student loan borrowers, especially those belonging to low– and mid-income levels.
Part I: Student Loan Forgiveness for Eligible Borrowers
Borrowers with individual incomes less than $125,000, or $250,000 for married couples, are eligible for student loan forgiveness up to $20,000. The Department of Education will cancel up to $20,000 in student loan debt to borrowers who received a Pell Grant and had loans held by the Department of Education. Those who did not receive a Pell Grant will receive up to $10,000 in debt cancellation. Since this plan will not benefit high-income households, the Biden administration has extended the pause on loan repayments once more until January 2023.
Part II: Manageable Loan System for All Borrowers
The Department of Education proposed a new repayment plan that will replace the current income-driven plan in place. It will prevent low-income borrowers from committing to monthly payments of more than 5% of their discretionary income, a drop from the current 10%. This would lead to an average savings of $1,000 per year for both current and future borrowers.
In addition, they will expand on the recent improvements to the Public Service Loan Forgiveness (PSLF) program. More than 175,000 public servants have had $10 billion in student loans canceled and the Department of Education expects these numbers to increase. Public servants include nonprofit workers, military members, and officials working in federal, state, local, or tribe level governments.
Part III: Reduced Cost of College
Earlier this year, President Biden approved the largest increase to Pell Grants since 2009, a bill that doubled the size of the maximum Pell Grant to $6,895. In addition to making tuition costs more manageable, the Biden administration has also taken steps to hold colleges accountable for keeping reasonable tuition costs, as well as ensuring students are receiving the value for their investments in higher education.
Assuming every eligible borrower takes advantage of this plan, it will completely cancel student loans for nearly 20 million borrowers, as well as partially cancel student loan debt for 43 million others.
Tax Debt Relief for Student Loan Borrowers
The debt relief in Biden’s Student Loan Forgiveness Plan will not be treated as taxable income for the federal income tax purposes. However, borrowers should remain mindful of available tax breaks and filing requirements. If you need tax help, give us a call at 800-536-0734 for a free consultation today.
We know that an increased budget for enforcement will lead to more audits. More audits mean more tax collection. The question that remains to be answered is exactly how much federal tax revenue the IRS expects to collect with the new Inflation Reduction Act.
How much taxes will be collected with the Inflation Reduction Act?
The Congressional Budget Office recently released a report that estimated the budgetary effects of the Inflation Reduction Act. They expect increased collections of about $203 billion over the next decade. This would raise federal revenue by almost $125 billion during that 10-year period after taking into account the $80 billion cost of the act.
Why is tougher enforcement necessary?
According to the IRS, most taxpayers pay their federal taxes willingly and on time. However, that still leaves nearly $400 billion in uncollected tax payments. They believe that tougher enforcement can help close the tax gap. In other words, stricter enforcement will help lessen the difference between the amount of taxes that is collected, and the amount taxpayers owe.
IRS enforcement, audits in particular, has been less frequent in the last decade. In fact, audit rates have dropped for all levels of income between 2010 and 2019. In fact, a tax return was three times more likely to be audited in 2010 than in 2019. However, this is not due to the IRS becoming more lenient or forgiving. The issue centers around staffing levels and funding. The IRS is expecting the new funding from the Inflation Reduction Act to help balance staffing levels in order to be able to collect more tax revenue.
Are you prepared for increased tax collection?
With increased IRS tax collection approaching, it’s important to be prepared. It’s never too late to seek tax debt relief. Get protected from the stress and burdens that come with IRS tax collection. Give us a call at 800-536-0734 for a free consultation.
More than half of the $80 billion Inflation Reduction Act will be spent on IRS enforcement. This specifically means collecting back taxes, conducting criminal investigations, monitoring digital assets, obtaining legal support and hiring thousands of new IRS auditors.
How many auditors will the IRS hire?
The IRS is looking to hire nearly 87,000 employees over the next 10 years. This is a major increase from its current 80,000 employees. A majority of the new hires will help bring IRS staffing levels back up to par to maintain efficiency. As of now, it remains to be seen exactly how many of the new hires will be responsible for auditing. The IRS will determine the number of enforcement agents they hire.
Who will be audited?
More auditors mean more audits, so understandably taxpayers are wondering if they will be impacted. The U.S. Treasury Department has said that the low and middle-class, as well as small businesses, will not be the focus of the upcoming increased enforcement activity. The IRS is to focus its auditing efforts on high-income taxpayers and large corporations. Specifically it will focus on those that earn more than $400,000 per year. The bill itself includes language that states the goal of the Inflation Reduction Act is not to increase taxes for any individual or entity earning less than $400,000 per year.
Are you prepared for an audit?
All in all, with increased IRS enforcement activity approaching, it’s important to be prepared. It’s never too late to seek tax relief. Let Optima’s team of experts help you get protected from the stress and burdens that come with IRS enforcement. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers.
Small business loans can be helpful and sometimes necessary in order to continue or expand a business. There are several types of loans available to small businesses, each with their own sets of pros and cons.
Term Loans
One of the most common types of loans for small businesses, a term loan is a lump sum of funds that is paid back over a fixed term and typically via fixed monthly payments. Interest will be paid on top of the principal balance borrowed. Sometimes it’s at higher rates than those offered by a traditional bank. However, it is a popular loan because funding is quick and it offers opportunities for business expansion.
Small Business Administration (SBA) Loans
SBA loans are offered by banks and lenders but administered by the Small Business Administration, a government agency that provides support to small businesses. Some business owners will prefer this type of loan since it’s backed by the government. It also offers high borrowing amounts at low rates and has long repayment terms. On the other hand, it’s harder to qualify for and it comes with a long and tedious application process.
Business Lines of Credit
Like a regular credit card, a business line of credit gives business owners access to a credit line of a certain limit, which is usually determined by business revenue and credit. Interest is only paid on the money charged, allowing greater flexibility in cash flow. This type of loan may also require paying additional account maintenance fees.
Equipment Loans
Businesses that want to own equipment can look into obtaining an equipment loan, which allows them to pay for business equipment over a specific term. The equipment will then serve as collateral for the loan. Sometimes a down payment is required for this loan.
Microloans
Microloans are small loans usually offered by nonprofits or government agencies and loan business owners up to $50,000. They are popular among startups and businesses located in disadvantaged cities. Some of these loans are accompanied by mentoring or consulting from the loan provider as well.
Invoice Factoring
This service allows businesses to sell their unpaid invoices to lenders to collect on. In return, the business will receive a percentage of the invoice value. This can benefit businesses that are awaiting payment from customers but need cash immediately.
Invoice Financing
Similar to invoice factoring, invoice financing allows businesses to sell their unpaid invoices as collateral in order to receive a cash advance. In this case, the business is still responsible for collecting payments from their customers in order to repay the amount financed.
Tax Debt Relief for Small Businesses
There are several loan options available to small businesses, whether they are a startup in need of fast cash, or an established business looking to expand. It is essential for small businesses to ensure that they are compliant with all tax laws in order to keep their business going. If you need tax help, give us a call at 800-536-0734 for a free consultation today.
Student loan debt is still on the rise and new developments regarding repayment and forgiveness have unfolded recently. President Biden will announce his plan for student loan forgiveness and repayment by the end of August 2022.
Student Loan Payment Pause
Loan payments are currently paused but are set to begin again on September 1, 2022. Payments have been paused several times since the Cares Act passed in March 2020. However, it seems the pause may be extended again past the August 31st deadline.
Student Loan Forgiveness
On the other hand, President Biden may announce a decision on student loan forgiveness. There has been some speculation that Biden plans to cancel $10,000 for more than 40 million federal student borrowers. Included loans are the Federal Family Education Loan Program (FFELP), Perkins Loans, Grad PLUS Loans, and Parent PLUS Loans, many of which have not been included in recent loan forgiveness initiatives.
Limited Waiver
A limited waiver was instituted in October 2021, allowing borrowers to count payments that were once considered ineligible toward forgiveness. Ineligible payments include late payments, partial payments and payments made under the incorrect payment plan. This one-time exception is due to expire after October 31, 2022. However, President Biden has named an extension of the waiver as another permanent means of loan forgiveness.
Republican Repayment Plan
Three Republican members of Congress introduced a new bill that serves as an alternative to President Biden’s potential plan. The plan does not include any major loan cancellation. It seeks to end the Public Service Loan Forgiveness program set to begin in July 2023 and the payment pause. The bill also introduces a new Income-Based Repayment (IBR) plan that would replace the current income-driven repayment plans. It would also eliminate capitalization of student loan interest. Finally, the bill would limits student loan interest to 10 years, which can save borrowers thousands of dollars.
Tax Debt Relief for Student Borrowers
While student loan forgiveness seems attractive to many, nothing is set in stone yet. That said, borrowers should continue to plan for repayment. Additionally, borrowers should remain mindful of available tax breaks and filing requirements. If you need tax help, give us a call at 800-536-0734 for a free consultation today.
