It’s tax time again, and no one is exempt – not even prison inmates. With the United States having the highest incarceration rate in the world, nearly 1 percent of residents aged 18 or over are currently behind bars.
According to the Prison Policy Initiative, approximately 2.3 million people are incarcerated in prisons and jails combined. Many of these inmates are required to file tax returns.
Prisoners who earn income from on-campus jobs — and those who are employed through work releases — may have to file a return if their income meets the requirements. There are also inmates who had a paid job before entering prison, and those whose spouses have reportable income and are required to file a joint filing.
Filing taxes is hard enough in the free world, but what about those behind bars? How do prisoners file their taxes?
In this blog post, I will cover the following topics:
- tax filing requirements
- Most prisons provide basic tax forms
- Prisoners not eligible for earned income tax credit
- Prisoners are exempt from ACA requirements
- No deduction for ‘charitable’ donations to prisoners
- Restoration of rebate credit
- Consult a Tax Professional
tax filing requirements
Tax filing requirements for prison inmates are the same as those in the free world. However, since many prisoners earn only pennies a day, they do not meet the threshold.
The gross income requirements for each filing status are:
- Single filing status:
- Under 65 $12,550
- $14,250 if 65 or older
- Spouse filing jointly:
- $25,100 if both spouses are under 65
- $26,450 if one spouse is under 65 and one spouse is 65 or over
- $27,800 if both spouses are 65 or older
- Married filing separately – $5 for all ages
- Head of Household:
- Under 65 $18,800
- $20,500 if 65 or older
- Eligible widows (widows) with dependent children:
- If under 65, $25,100
- $26,450 if 65 or older
Most prisons provide basic tax forms
Inmates can still use their tax returns if they don’t have friends or family members outside to help them during tax filing season. Basic federal and state forms are available from most prisons. Some prisons also offer voluntary tax schemes. Since prisoners do not have access to the internet, filing online is not really an option.
If prisoners file a joint return, they must sign the form. It can be a bit of a logistical nightmare, but many facilities allow you to bring these legal forms to your visit so you can get a signature, or you can work with the inmate’s case handler.
According to the CPA Journal, “If an inmate is unable to complete a required tax return online or is unable to provide all required information to a tax preparer, the inmate may designate someone to have a power of attorney for tax matters. In such cases, the inmate must File IRS Form 2848, which authorizes an individual to represent an inmate before the IRS.”
Prisoners not eligible for income tax credit
If the prisoner earned income while incarcerated, those wages are not considered “earned income” for the Earned Income Tax Credit or the Child Tax Credit.
Ineligible income also includes amounts paid for work performed in a work release program or while living in a halfway house.
Prisoners are exempt from ACA requirements
Under the ACA, Americans must maintain at least minimum health insurance. However, incarcerated persons are exempt from this requirement.
No deduction for ‘charitable’ donations to prisoners
If you have an incarcerated relative — and you send them money on a regular basis — it’s not considered a charitable donation. The same goes for fundraisers and donations aimed at helping wrongly convicted prisoners pay for their appeals.
Restoration of rebate credit
Prisoners who have never received an Economic Impact Payment (whether it is the first, second or third payment) during the pandemic are eligible to claim it as a recovery rebate credit.
Offenders can request blank 1040 forms from their case managers. The case manager will write the offender’s name and DOC ID on the form before giving it to the offender.
Previously, prisoners had to call an 800 number to resolve the issue. However, the IRS now has a program in place for state corrections departments to assist lawbreakers.
Consult a Tax Professional
The topic of prisoner tax filing is an extremely complex issue. We are not CPAs or lawyers. Therefore, if your loved one is in prison and needs to file a tax return, we recommend that you consult a tax professional.
The rules don’t change for jail inmates during tax time. If they meet the income requirements, they must submit an application like everyone else. However, the problem is getting tax forms, envelopes and stamps.
Since inmates cannot file online, they will need to use the proper forms and tools to file their tax returns. Most facilities have case workers who can assist inmates with tax preparation. However, this can be an extremely difficult process if prisoners do not have someone outside to help them file.
Did you file a tax return for someone who was incarcerated? Let us know in the comments below.
Sources: Preparing Tax Returns for Inmates https://www.cpajournal.com/2020/05/22/preparing-tax-returns-for-inmates/#:~:text=Most%20prisons%20supply%20basic%20tax,returns%20on%20the%20IRS%20website.&text=Inmates%20may%20also%20file%20their,although%20fees%20may%20be%20incurred. Filing Taxes When A Loved One is in Prison How to file taxes while in prison Filing Taxes if you are Currently Incarcerated or Re-Entering Society Prisoner Re-Entry Program Recovery Rebate Credit Mass Incarceration: The Whole Pie