Why should you consult with your CPA before signing any kind of loan docs? Here is a classic and tragic example I found in recent news.
With increasing tuition fees, more and more students are borrowing money to pay for their school. In the case of student loan borrower is unable to repay the borrowed money because he or she dies, that’s the end of the story. Both lender and IRS can’t go after the deceased.
However, if the borrower is the parent that it is a different story. Meaning, lender and IRS, both can come after the deceased parents. In a recent news store on Baltimore Sun, Regina Friend is going threw one such ordeal.
Temple University student committed suicide last year. Student loans and $55,400 in ParenPlus debt were forgiving. But her parent, a single mom, was shocked when she found out that IRS expects her to pay a $14,000 in tax bill because the forgiven debt is counted as personal income.
IRS may eventually forgive this debt if the taxpayer can’t afford to pay it during a reasonable time but that might take a decade or two explained Sanjiv Gupta CPA. However, in meanwhile, penalties for underpaid tax will accrue.
We all can learn more about this tragic event. Before signing the loan docs consult with your CPA to learn how you can strategically borrow money to avoid possible future problems.