Wrongfully Incarcerated Individuals Receive Refund Extension

Posted on November 16, 2018

If you were wrongfully incarcerated and received a monetary award in connection with your incarceration and paid tax it, you may be entitled to a refund of those taxes. Under the Bipartisan Budget Act of 2018, a wrongfully incarcerated individual now has until December 17, 2018, to file a claim for refund. Under the law, an individual that was wrongfully incarcerated and who receives an award for civil damages, restitution, or money awards related to that incarceration does not have to include that money as income on their tax returns. If they have already filed a tax return claiming that money award as income and paid tax on it, that individual can file a claim asking the IRS to refund that money. Ordinarily, a taxpayer has three years from the date a tax return is filed or two years from the date the tax was paid to file a claim for refund. If a timely claim for refund is not made, the IRS will be barred from refunding that money to the taxpayer. However, under the Bipartisan Budget Act of 2018, Congress extended the refund statute of limitation to December 17, 2018. If you were wrongfully incarcerated, there are certain steps that you must take in order to claim the refund including writing “Incarceration and Exclusion PATH Act” on the top of the tax return and mailing it to a special address. If you do not timely file your claim for refund within the extended refund statute of limitation, you will be barred from claiming a refund in the future. If you were wrongly incarcerated and received an award and paid tax on that award, call us, we can help.