My sister in law been on SSI since She was 20. She worked only a short time when she was 17. In 1987 she did go to a trade school but a short time after enrolling she became disabled and has since been. SSI is not taxable therefore she never filed a return and now 12+ years later her student loan has been conditionally discharged (I believe they monitor for 3 years) and hopefully will be fully discharged after the monitoring period. She received a 1099C in mail in the amount of 8300.00 and we are not sure how to help her being that she never filed a return or does she even need to? Her only income is from SSI and i think she gets 700 or so a month. We have got so many conflicting answers from different CPA's saying yes she needs to file and others saying no she doesn't because it is under 10K. Anyone have any insight on this? SO confused

#1;I guess it depends;basically, getting a student loan discharged or forgiven may seem impossible, but it is possible to have a student loan discharged or forgiven. In many instances it is a matter of filing for bankruptcy, and it will involve a lawyer and a court decision. Since she is currently disabled and have filed or are filing for permanent disability, it may be possible to have her student loan forgiven as part of a bankruptcy settlement. This course of action must be pursued through the provider of the student loan. A student loan provider will have to hold a consultation with her if she can prove permanent disability. Sometimes a student loan provider will forgive student loan debt without filing for bankruptcy first.Be mindful of the fact that if a student loan provider voluntarily forgives student loan debt in this manner, then the entire forgiven debt amount may be considered taxable income by the IRS.then, as she was granted forgiveness on this loan, she received a 1099-C for the amount,$8300, which needs to to be reported on her taxes; irs rev rulings, the letter , specifies that the student loan discharges as Death and Disability Discharge do represent taxable income: Loan discharges for closed schools, false certification, unpaid refunds, and death and disability are considered taxable income.

note;Individual states may have different treatments of loan forgiveness for state income tax purposes. For example, Pennsylvania does not treat loan forgiveness as taxable income.


#2;as mentioned above; as you can see,it is not easy straightforward issue.Please contact the irs for more info in detail