Posted on December 31, 2013December 5, 2017 by Jan Roberg

How To File a Tax Return When You Have No Income (And Why You Might Want To)

If your income is below the filing requirement, there is no need to file a federal tax return. But for some people, it still makes sense.

There are two main reasons for filing a US income tax return even if you don’t have any income to report.

1. Identity theft, and
2. Identity theft.

I realize it looks like I was repeating myself but I wasn‘t. I’m talking about two different kinds of identity theft. The first is related to an unauthorized person claiming your kids as dependents on their tax return. The second involves someone claiming you, or impersonating you, on a tax return.

Let’s talk about your kids first. Here’s a story I’ve heard several times:

“I’m on SSI and I support my daughter 100%. We get nothing from her father but he claims her every year on his tax return and gets thousands of dollars in refund money. I reported him to the IRS but I haven’t heard anything. I tried to file a tax return but other tax company said I don’t have income so I can’t file. Is there anything I can do to stop him from profiting on my child that he never sees?”

One way to deal with this issue is to report the tax fraud. Here’s more information about how to do that: http://robergtaxsolutions.com/2010/11/how-to-report-tax-fraud/. But here’s the thing–the IRS will never tell you what happens. You’ll never know if the fraud stops. You might not have enough information to give to the IRS to stop the fraud. But if you file a tax return and claim your child as a dependent–that messes up their computers and something is going to happen. The IRS will have to deal with the issue. You’ll need to be prepared to prove that your child lives with you to stop your ex from claiming your child, but hey–with no income, you’re not getting a refund. You’ve got nothing to lose!

Here’s another story that I don’t hear as often, but I have had to deal with before:

I got a letter from the IRS saying that my tax return is wrong and that I shouldn’t have claimed those kids. I don’t understand, I don’t have any kids and I never filed a tax return. What’s going on?

Fraud isn’t limited to claiming kids that aren’t yours; the fraudsters will also use a non-filer’s identity to claim kids that aren’t theirs for huge refunds and then when the IRS investigates, some innocent person who never filed a return gets caught and gets fined. It’s a nightmare to sort this all out.

So how do you protect yourself? File a tax return.

Just because you don’t have any taxable income doesn’t mean you can’t file a tax return. You won’t get any money back, but you can still file an information return just to let the IRS know that you’re out there. Many software programs won’t process the return if you show no income, so you’ll want to plug $1 into the other income section on line 21 for the long form.

You can even file for free with no income from my website. Just go to the “Do Your Own Taxes” tab at the top. Of course, you can always go to the IRS.gov website and use their Free File Online instead. The important thing is that you file a return and protect yourself.

Posted on September 10, 2013May 31, 2016 by Jan Roberg

VA Disability Benefits Taxability

The IRS doesn’t tax your VA Disability, but if you owe the IRS money, they count your benefits as part of your ability to pay the IRS back.

I was having a bout of writer’s block and had a blog post due. Fortunately, I just received this email from Morgan, a disabled Navy vet, and it seemed like a worthy topic.

I was placed on “uncollectable status” by the IRS last year. Now, to keep my uncollectible status, they want me to provide them with the amount I receive from the VA each month along with my SSDI amount! Am I missing something here? I am totally
confused. I was told that VA disability benefits are tax exempt. So is my SSDI benefit. If that’s so, why is it considered income by IRS? Can you help me with this so I can understand?

This is a good question—if VA and SSDI payments aren’t taxable, why does the IRS ask about them when settling tax debt? Or in Morgan’s case, when determining collectability status?

The answer is—there’s a difference between “taxable” income and “money that you have that you can use to pay bills.” So even though things like VA payments and SSDI are not taxable, they are counted towards money available to pay bills.

So here’s what the IRS is doing. They’re taking all of your income—whether it’s taxable or not, and adding it together. Then they’re looking at all of your expenses and if there’s any money left over, that’s what they consider is available for you to pay your taxes with.

Here’s how the formula works: Income includes wages, interest, dividends, business income, rental income, distributions, pensions, social security, child support, alimony, and other income. VA payments and SSI would count as “other income”.

Expenses include: Food, clothing, and misc., housing and utilities, cost of owning and operating a car or using public transportation, health insurance, out of pocket health care, court ordered payments, child or dependent care, life insurance, taxes, and other debts.

Here’s the kicker. Expenses are limited to what the IRS calls “national standards.” The national standard for food, clothing, housekeeping supplies and personal care products is $583 for one person. Out of pocket healthcare is $60 if you’re under 65 and $144 if you’re over. If you own a car, the allowance is $517 for owning and operating it. If you use public transportation, you’re allowed $182 a month.

Housing and utility expenses vary greatly by area. Here in St. Louis County, the expenses allowed for one person is $1,426. If you live in St. Louis City, you’re only allowed $1,208.

You can look up all of the collection financial standards on the IRS website: http://www.irs.gov/Individuals/Collection-Financial-Standards

When dealing with the IRS on this issue, you are allowed to use the national standards for your family size without them questioning the amount you actually spend. The housing allowing will be the amount you actually spend or the local allowance, whichever is less.

So while the IRS is asking about VA payments and SSI to determine if you’re capable of paying a tax debt, SSI and VA payments will remain non-taxable income on your tax return.

Posted on February 16, 2011May 31, 2016 by Jan Roberg

Tax Tips for Persons with Different Abilities

Click here for link to Paraquad, Independence for People with Disabilities.

I received a notice from the IRS about “Tax Benefits for Disabled Taxpayers” and the first thing it mentioned was an increased exemption for blind taxpayers. I found it a little odd because in other parts of the tax code, blind doesn’t constitute a disability so go figure.

In IRS speak, disabled generally means you can’t work and are unable to care for yourself. But, there are plenty of people who are in wheel chairs, deaf, blind, or with some other “disability” but are perfectly capable or working and fending for themselves. Confused? Me too. This blog post is going to cover tax issues for persons with any type of physical or mental impairment.

So first, blindness: there is an additional standard deduction for being blind or partly blind. If you are partly blind, you must get a certified statement from an eye doctor stating that your corrected vision is not better than 20/200 in the better eye, or that your field of vision is not more than 20 degrees. Keep the statement in your records. Of course, if itemizing your deductions gives you a better return, do that instead.

Disability related payments: certain disability related payments such as Veterans Administration (VA) disability benefits and Supplemental Security Income (SSI) are excluded from gross income on your income taxes. If you receive employer provided disability payments, those are taxable.

Impairment Related Work Expenses: If you have a physical or mental disability that limits your employment; you may be able to claim business expenses in connection to your workplace. This is different from the regular employee business expense deduction because you don’t have to meet the requirement that the expense exceed 2% of your gross income. An example of this kind of expense would be a special computer screen for someone with a vision impairment. The key requirement here is that the expenses must be necessary for the taxpayer to work.

Medical Expenses: If you itemize your deductions, you may be able to deduct your medical expenses. This is true for anyone whether they have a disability or not. What’s important here is that you can include costs for making your home more accessible as a medical expense. An example of this would be installing ramps or widening doorways to your home. If the improvements you make increase the value of your home, they are not deductible as a medical expense. An example of something that probably wouldn’t be deductible would be a heated spa; while it would be beneficial to have the heated spa to alleviate pain, the spa would also increase the resale value of the home and therefore couldn’t be claimed as a medical expense.

Earned Income Tax Credit: EITC is available to disabled taxpayers as well as to parents of a child with a disability. If you retired on disability and receive taxable benefits under your employer’s disability retirement plan, that’s considered to be earned income for purposes of the Earned Income Tax Credit until you reach retirement age. EITC not only reduces your tax liability, but it may even result in a refund.

It’s important to know that EITC has no effect on certain public benefits. Any refund you receive because of the EITC will not be considered income when determining whether you are eligible for benefit programs such as Supplemental Security Income and Medicaid.

If you have a disabled child, there is no age limitation for EITC.

Also, taxpayers who pay someone to care for their dependent or spouse so they can work or look for work may be able to claim the Child or Dependent Care Credit. There is no age limit to this credit if the child or spouse is unable to care for themselves.

For more information about tax benefits for persons with different abilities, check out IRS publication 907 http://www.irs.gov/publications/p907/ar01.html