Tax Preparation

Three Quick Tax Tips for People with Disabilities

It’s tax season again. Your life may be very different since you were diagnosed with Parkinson's disease. As your life changes, so do your taxes. These quick tips will provide information on determining if you qualify for additional tax credits, getting free help with your taxes through the Volunteer Income Tax Assistance, and calculating the taxes on your lump-sum retroactive award.

Tip 1: Even if your income is low, it’s usually a good idea to file a tax return. 

If your income is low, the IRS may not require you to file a tax return. But file anyway. Even though you don’t owe money to the IRS, the IRS may owe you money.

Did you or your spouse work at any point during 2011? Were income taxes withheld from your paycheck? If so, the IRS might owe you a tax refund. But you won’t get a refund if you don’t file a return. The same goes for state income taxes. If you or your spouse had any state income taxes withheld from a paycheck in 2011, file a state income tax return to see if you get a refund.

Here’s a key reason to file a tax return. It’s called the Earned Income Tax Credit (EITC), and it can be a big help if you qualify. The EITC helps low-income individuals and families. If you or your spouse earned any taxable income during the year, you may qualify if the amount you earned is less than the earnings level set by the government. Click here to see what earnings qualify in 2011 and to learn about other tax credits for people with lower incomes.

It’s possible with the EITC to get back more money than you actually paid in taxes. You don’t want to miss out on this much-needed cash, so file a return if you think you may qualify. Many states also offer an Earned Income Tax Credit. That’s another good reason to file a state return in addition to your federal return.

Tip 2: You can get free help with your taxes.

The IRS has a Volunteer Income Tax Assistance (VITA) program to help people with low or moderate incomes file their taxes. Trained volunteers can help you prepare your return. They will check to see if you qualify for the EITC and other tax credits and deductions so you can get the refund you are entitled to.

There are more that 12,000 VITA sites across the United States. You’ll find VITA sites in community and neighborhood centers, libraries, schools, shopping malls and other convenient places. Call the IRS at (800) 906-9887 to find a location near you.

Click here for information about other ways you can get free or low-cost help with your taxes.

Tip 3: If you received your Social Security disability award in 2011, get help to figure out the taxes on your lump-sum retroactive award. 

It’s very complicated to calculate the taxes on a lump-sum payment and not something you want to do yourself. The last thing you need is to pay more tax on your lump sum than you owe.

An experienced tax preparer can help you with your taxes in the year you receive your lump-sum payment. You may still qualify for free tax help. But, for this one year, you could actually save money by hiring a knowledgeable professional who can help you pay the correct amount of tax on your lump sum.

Find a tax preparer with experience doing taxes for people with disabilities. When you call a tax preparer, ask to talk to someone who knows about taxes and Social Security disability.

Not all tax preparers understand how to do taxes on a lump-sum payment. Print off the information in the Personal Finance section of this website about how to do taxes on Social Security disability income. Give this information to your tax preparer. At the very least, make sure your tax preparer is familiar with the disability information in IRS Publication 915.

It’s no fun doing your taxes. But you’ll be glad you made the effort if you get some refund money for your trouble.

Reprinted with permission. Original source: Allsup, Inc.


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