Understanding Tax Obligations for People with Disabilities
Disability Tax Credit
People with disabilities may be eligible for the Disability Tax Credit (DTC), which is a non-refundable tax credit that can reduce the amount of income tax they owe. To qualify for the DTC, the person must have a physical or mental impairment that has lasted or is expected to last for at least 12 months and significantly restricts their ability to perform daily activities.
Taxation of Disability Benefits
Disability benefits received from the government or from private insurance may be subject to taxation depending on the circumstances. If the disability benefits are paid out as a result of a workplace injury and are from Workers’ Compensation, they are generally tax-free. However, if the benefits are paid out by an insurance company, they may be taxable.
People with disabilities may be able to claim certain expenses on their tax return as deductions or credits. For example, if they require a mobility aid such as a wheelchair or scooter, the cost of purchasing or renting it may be claimed as a medical expense. Similarly, if they require renovations to their home to make it more accessible, the cost of these renovations may also be claimed as a medical expense. It is important to keep receipts and documentation of all medical expenses to support any claims made on the tax return.
Options for Relief from Back Taxes for Disabled Individuals
Options for Relief from Back Taxes for Disabled Individuals
Individuals with disabilities may face unique challenges when it comes to managing their finances, including paying taxes. However, there are options available to these individuals to help relieve the burden of back taxes.
Offer in Compromise
One option for relief from back taxes for disabled individuals is an Offer in Compromise. This program allows taxpayers to settle their tax debt for less than the full amount owed, based on their ability to pay. Disabled individuals may qualify for this program if they are unable to work due to their disability and have little to no income.
Currently Not Collectible Status
Another option for disabled individuals facing back taxes is a Currently Not Collectible (CNC) Status. This status means that the IRS has determined that the taxpayer cannot currently afford to pay their tax debt, but they will continue to review the taxpayer’s financial situation in the future. Disabled individuals may qualify for CNC status if they have a disability that prevents them from working and have little to no income.
Overall, it is important for disabled individuals facing back taxes to explore their options for relief and to work with a qualified tax professional who can help navigate the complexities of the tax system.
Seeking Professional Help to Resolve Tax Issues
When to Seek Professional Help
If you find yourself overwhelmed by the process of resolving your tax issues or if the IRS has already taken legal action against you, it may be time to consider seeking professional help. Tax professionals can provide valuable guidance and expertise to help you navigate the complexities of tax law.
Types of Professionals to Consider
There are several types of professionals who can assist you with your tax issues. Tax attorneys specialize in tax law and can represent you in court if necessary. Certified Public Accountants (CPAs) are licensed professionals who can offer tax planning and preparation services, as well as financial advice. Enrolled Agents are licensed by the IRS and can represent taxpayers in disputes with the agency.
Choosing a Professional
When choosing a tax professional, it’s important to do your research. Look for someone who has experience working with individuals with disabilities and understands the unique challenges you may face. You should also make sure they have a good reputation and are properly licensed and insured. Finally, be upfront about your financial situation and make sure you understand all fees and charges associated with their services before agreeing to work with them.
Navigating the IRS Collection Process as a Disabled Person
Applying for IRS Disabled Status
If you are someone with a disability, you may be eligible to receive Disabled Status from the IRS. This status can provide various tax benefits and relief options. To apply for Disabled Status, you will need to submit Form 8826, Disabled Access Credit, along with your tax return. Additionally, you will need to provide documentation of your disability, which can include a doctor’s note or other medical records. Once approved, you may be eligible for additional deductions and credits.
Requesting an Installment Agreement
If you are unable to pay your back taxes in full, you may want to consider requesting an installment agreement with the IRS. This allows you to make monthly payments for a set period of time until you have paid off your debt. As a disabled person, you may be able to qualify for a reduced monthly payment amount based on your income and expenses. To request an installment agreement, you will need to fill out Form 9465, Installment Agreement Request, and provide documentation of your financial situation.
Seeking Professional Assistance
Navigating the IRS collection process can be overwhelming, especially if you are dealing with a disability. It may be helpful to seek the assistance of a tax professional who is familiar with the needs and challenges of disabled individuals. A tax professional can help you understand your options and assist you in communicating with the IRS. They may also be able to help you negotiate a settlement or payment plan that works for your unique situation.
Preventing Future Tax Issues for Disabled Taxpayers
Keeping Accurate Records
One of the most effective ways to prevent future tax issues is to keep accurate records. Disabled taxpayers should maintain a record of all medical expenses as well as any income that they earn. By keeping all necessary receipts, invoices, and documents, it becomes easier to claim deductions and credits when filing a tax return. This ensures that the taxpayer does not miss out on any credits or deductions that they are entitled to.
Working with an Accountant or Tax Professional
Disabled taxpayers may find it helpful to work with an accountant or tax professional. These professionals can provide guidance on tax planning strategies and help individuals understand their tax obligations. They can also help disabled taxpayers make the most of available deductions and credits. Additionally, an accountant or tax professional can offer assistance in the event of an audit or other tax-related issue.
Staying Up-to-Date with Tax Law Changes
The tax code is complex and constantly changing. Disabled taxpayers should stay up-to-date with changes in tax laws that may affect them. This includes staying informed about any new credits or deductions that become available as well as any changes to existing tax laws. Working with an accountant or tax professional can help ensure that disabled taxpayers are aware of these changes and can take advantage of them. Additionally, the IRS website provides information on tax law changes and other tax-related topics.