IBR Recertification Question - Can I use last year's tax return if my salary doubled midyear? Forum

[Anonymous User]

Hi, I flamed out of big law as a first year because of a combo of a slow firm and making typos (I assume I wasn't liked, and am admittedly bad in hierarchal structures), and took a substantial income drop to do a 9-5 doing legal research and analysis for a different kind of company. For performance-based reasons that helped lead to growth, my income has doubled to the point of being comparable to big law base.

I have been on IBR, and I'd obviously prefer to use last year's tax return because then my monthly payment would be much lower. There is a question that asks if your income significantly changed, and gives a defining example as being laid off. Now, I was not laid off and significant is subjective so my question is whether I could use last year's income. I understand that a 200% increase in income is likely significant under most reasonable analyses so will prob just say yes, show a paystub and pay more, but if it's customary for people to just submit their tax return in situations like mine, I don't want to be a shlump.

[HillandHollow]

Construing a 200% increase in income as anything less than substantial is ludicrous.

[nixy]

It’s absolutely a substantial increase, but anecdotally, I’ve known people who use whichever is to their advantage (tax return or salary) and just wait till their tax return catches up with the higher salary. Depends how you feel about doing that.

[Anonymous User]

Construing a 200% increase in income as anything less than substantial is ludicrous.

OP here: I know it's substantial but significant is a much more powerful word. I wouldn't say the Yankees significantly improved their pitching rotation by trading for James Paxton. I'd say he's a substantial addition. Significant would be more like if they additionally got Kluber and deGrom, but I get that my situation probably crosses over into the significant threshold. I'm more just looking to confirm that standard practice is to check the box for significant from anyone whose been in a similar position - probably someone who clerked for a year, then went to big law.

[Anonymous User]

It’s absolutely a substantial increase, but anecdotally, I’ve known people who use whichever is to their advantage (tax return or salary) and just wait till their tax return catches up with the higher salary. Depends how you feel about doing that.

OP again. I don't have a problem with doing it if it is not dishonest, and won't lead to disbarment. I would probably give most of the money to charity, but like most would like to give as little money to the government as possible without violating my personal ethics and the standards of the legal profession.

[HillandHollow]

I meant to say "significant," but I misstyped, sorry. Construing that much as anything other than significant is ludicrous. Especially when you are aware that the point is to determine what you are able to pay per month. There is not a good argument for why you would supply your old, significantly lower, income.

[encore1101]

It’s absolutely a substantial increase, but anecdotally, I’ve known people who use whichever is to their advantage (tax return or salary) and just wait till their tax return catches up with the higher salary. Depends how you feel about doing that.

OP again. I don't have a problem with doing it if it is not dishonest, and won't lead to disbarment. I would probably give most of the money to charity, but like most would like to give as little money to the government as possible without violating my personal ethics and the standards of the legal profession.

Stop. You know what the right answer to this is. There's no reasonable, defensible interpretation of the word "significant" where making twice as much money as you did would not be considered significant.
If making twice as much is "substantial," but not "significant," what would you consider "significant" increase? Making three times as much? Come on now.p

[Anonymous User]

It’s absolutely a substantial increase, but anecdotally, I’ve known people who use whichever is to their advantage (tax return or salary) and just wait till their tax return catches up with the higher salary. Depends how you feel about doing that.

OP again. I don't have a problem with doing it if it is not dishonest, and won't lead to disbarment. I would probably give most of the money to charity, but like most would like to give as little money to the government as possible without violating my personal ethics and the standards of the legal profession.

Stop. You know what the right answer to this is. There's no reasonable, defensible interpretation of the word "significant" where making twice as much money as you did would not be considered significant.
If making twice as much is "substantial," but not "significant," what would you consider "significant" increase? Making three times as much? Come on now.p

I guess I'm just curious what people do in their year between clerking and big law. That's a 3-4x increase. If they don't count that as significant, then it's a fortiori that this isn't significant.

[nixy]

I mean, it’s clearly significant, as is your increase. Whether people choose to disclose that increase before they have to when it’s revealed on their tax return is a separate question than whether the increase is significant.

[Anonymous User]

I was in this position. I ended up using my $0 from the previous year.

Yes, you can’t really argue that a 200% increase isn’t significant. HOWEVER, ALL of the examples talking about a significant change refer to losing a job, getting a decrease in salary, etc.

At the end of the day, it’s a pain in the butt to submit additional forms instead of your tax return and I would assume it’s more annoying for the other end too.

I will always justify it the way I did above if I’m ever questioned about it.

People will disagree with my reasoning, but I don’t see it being a big issue.

[Anonymous User]

Have others followed the above poster? If so, were there negative repercussions? Again, I'm not trying to do anything dishonest but just get a sense for what's customary in this situation.

[Anonymous User]

Sorry post above was me (OP). I'm just trying to get a feel for custom.

[Anonymous User]

I'm a recent grad that started in big law last month and I asked the dean of my school's financial aid this same question a week ago. He told me not to check that box, even though my salary did substantially change since I didn't summer last year (normal hourly internship).

[cavalier1138]

I would probably give most of the money to charity, but like most would like to give as little money to the government as possible without violating my personal ethics and the standards of the legal profession.

Oh, well if you promise you'll give most of the money to charity, then it's no longer unethical. The free market works!

[Elston Gunn]

Have others followed the above poster? If so, were there negative repercussions? Again, I'm not trying to do anything dishonest but just get a sense for what's customary in this situation.

The answer is you can likely get away with it, but you’re also knowingly giving materially inaccurate information in a certified statement to the government so ymmv.

[LaLiLuLeLo]

It’s one of those things everybody does but it’s technically wrong.

It’s a judgment call on your end. I’d use the tax return.

[clarion]

It’s one of those things everybody does but it’s technically wrong.

It’s a judgment call on your end. I’d use the tax return.

^What this person said. It's way more common than people ITT seem to think it is.