Low Income Taxpayer Clinic

18Legal Aid’s Low-Income Taxpayer Clinic (LITC) helps people whose incomes are to small for them to hire a private attorney.

Legal Aid’s tax lawyers can help you with federal income tax problems. These problems can include disputes about whether you qualify for the Earned Income Tax Credit, whether you are responsible for your spouse’s tax debts, and how to settle your tax debts.

Legal Aid does not prepare and file tax returns. We can refer you to organizations that can prepare returns without charging you any fees or costs.

When you contact Legal Aid, please be sure to have all of the following documents available. You may be asked to fax or mail copies to us:

  • Your current income, including pay stubs
  • Your Social Security number
  • Any tax bills, letters or notices from the IRS
  • Any letters or notices from the U.S. Tax Court
  • Any letters you have written to the IRS
  • Copies of the tax return(s) you filed for the year(s) in question

FAQs

What is the Earned Income Tax Credit (EITC)? Close

The Earned Income Tax Credit is a special credit for some working people. It can mean a tax refund to you or a reduction in the income tax you pay.

Other Resources

See Legal Aid’s Earned Income Tax Credit Brochure for more details.

The IRS claims that I owe them for my spouse’s tax debt. Is there anything I can do? Close

When you sign a tax return with your spouse, both of you are responsible for any tax debt resulting from that tax return. That means you could be responsible for the whole tax debt even if you did not earn any money that year or if the debt is your spouse’s fault. You may qualify for innocent spouse relief which means you may not have to pay all or part of that tax debt.

The IRS claims I owe, but I do not. What can I do? Close

If you don’t think you owe the tax debt because your tax return was correct, you can ask the IRS to review your tax return again. This is called an “Audit Reconsideration.” Ask the IRS to review your case by submitting new and relevant information to prove the items the IRS did not allow when it audited your tax return the first time.

I owe federal income taxes, but I cannot pay. What can I do? Close

You have at least three choices.
  1. Make monthly payments through an “Installment Agreement.”
  2. Ask to be placed in “Currently Not Collectible” status because you face a financial hardship. Currently Not Collectible status means the IRS will not collect on the debt, except to take your future tax refunds and apply them to this debt, but the debt still exists.
  3. Offer to settle the debt by paying part of the tax. This is called an “Offer In Compromise,” and is based on your financial condition.

 

Legal Aid’s Tax Practice Ensures Financial Stability for Clients Close

Camille Gill, Esq.

Davida Dodson, Esq.

The Legal Aid Society of Cleveland’s Low-Income Taxpayer Clinic (LITC) helps low-income people who have a problem with the Internal Revenue Service. Cleveland’s Legal Aid is one of 150 LITC’s across the United States, funded to provide representation before the IRS or in court on audits, tax collection disputes, and other issues. Cleveland Legal Aid’s LITC has a special focus on helping individuals with limited English proficiency.

Low-Income Taxpayer Clinics – including Cleveland Legal Aid’s – are not part of the IRS but they receive partial funding from the IRS via the LITC grant program.

Cleveland Legal Aid’s LITC is led by senior attorney Susan Morgenstern, who is nationally recognized for her advocacy on behalf of low-income taxpayers. Numerous other Legal Aid attorneys and pro bono volunteers handle tax cases. An example of a recent success story is that of Lorain resident and adoptive mother of two special needs children, Erin Smith.*

Legal Aid attorney Davida Dodson represented her in a divorce. In the divorce decree, custody of the children was split, but Ms. Smith had one extra day of custody with her children. That one extra day made Ms. Smith the primary caregiver, and hence Ms. Smith qualified for the Earned Income Tax Credit (“EITC”). Having the ability to claim the EITC on her tax return meant additional financial stability for Ms. Smith, and provided her funds to tend to the needs of her special needs children.

However, after filing her 2011 tax return, Ms. Smith was contacted by the IRS, asking for additional paperwork and assessing her penalties for claiming the EITC in error.

Legal Aid attorney Camille Gill, in consultation with Susan Morgenstern, determined that Ms. Smith was not required to go through the hassle of this additional paperwork. The careful wording in the divorce decree was sufficient to preserve Ms. Smith’s EITC credit. Ms. Gill argued such and the IRS corrected Ms. Smith”˜s account and refunded the penalties they had incorrectly charged her. Ms. Smith was credited nearly $2,400.

* client’s name changed to protect privacy

What is an H-2A worker? Close

Some U.S. employers apply for special temporary visas to hire foreign agricultural workers. These visas are called H-2A visas. You will know if you are an H-2A worker because your passport or immigration documents will state what kind of visa you have.

Other Resources

Do H-2A workers have to pay taxes? Close

Yes. Foreign agricultural workers earning more than $600 are required to report this information in Box 1 of a W-2 Wage and Tax Statement. All H-2A workers should receive a W-2, and not a 1099 from their employer. For more information, please see IRS Publication 519 at http://www.irs.gov/publications/p519/index.html.

Other Resources

I employ H-2A workers. Should I give them a 1099 or a W-2? Close

H2A workers must receive a W-2 Wage and Tax Statement. They should not receive a1099. If an H-2A worker has filed taxes using a 1099, the employer should issue a corrected income statement on form W-2. For more information, please see http://www.irs.gov/Individuals/International-Taxpayers/Foreign-AgriculturalWorkers.

If an H2A worker filed a return with a 1099, he or she should contact the Legal Aid Society of Cleveland to get help amending their prior returns. The worker should call Legal Aid at 1-888-817-3777.

Other Resources

Are H-2A workers able to get Social Security Numbers? Close

Yes. All H-2A workers are eligible for Social Security Numbers and should have one in order to file their taxes. To obtain a Social Security Number (SSN), the worker must complete Form SS-5 and take it to a Social Security Office with a current passport and current H-2A visa. An H-2A worker should not use an Individual Taxpayer Identification Number (ITIN) to pay his or her taxes. Dependents of an H-2A worker who are not eligible for SSNs should obtain ITINs.

Other Resources

I employ H-2A workers. Should I withhold taxes from their pay? Close

While withholding is not required by law, withholding may benefit both H-2A employers and H-2A workers. Withholding creates an incentive for H-2A workers to file a tax return. When workers file tax returns, the IRS does not have to initiate collection efforts, and employers do not have to deal with hassles such as wage garnishment. If an H-2A employer does not withhold income, the worker should make estimated payments to avoid owing a lot of taxes at the end of the year.

Other Resources

I am an H-2A worker. May I claim my spouse and/or children as dependents on my tax return? Close

Workers with dependents who live in Mexico, Canada or the United States may claim exemption deductions for their dependents. The worker’s spouse and dependents need a Social Security Number or an Individual Tax Identification Number (ITIN) to claim exemptions. If a dependent is not eligible for a Social Security Number, the dependents may apply to the IRS for an Individual Tax Identification Number (ITIN) when the tax return is filed.

Other Resources

I have a Federal Income Tax problem – can Legal Aid help? Close

Legal Aid’s Low Income Taxpayer Clinic (LITC) assists low-income taxpayers in resolving their disputes with the IRS about federal income tax matters.

We provide free legal services to people whose income is too small to hire a private attorney. If you have a tax problem with the IRS, please contact us to discuss it. Depending upon your circumstance, we may assist you in the following ways:

Education – We can answer your tax questions, as well as provide you with important information and direction.

Negotiation –We can negotiate with the IRS to obtain a reasonable payment plan and/or an offer-in-compromise that may reduce your tax burden.  If your current expenses exceed your income, you may qualify for currently not collectible status.

Litigation – When your case must go to court, we can represent you.

Click here to learn more via our brochure, “Federal Income Tax Problem? Legal Aid may be able to help you.” And, click here for a version in SPANISH.

How Can I Save Money & File My Taxes for Free? Close

It is 2015, and time to file your 2014 taxes!  Save money and file taxes for free!  The Volunteer Income Tax Assistance program offers free tax help to people who generally earn less than $53,000 per year, persons with disabilities, older adults and people with limited English proficiency.  Call 2-1-1 to find a free tax preparation site near you.

For more information about the VITA program, go to http://www.irs.gov/Individuals/Free-Tax-Return-Preparation-for-You-by-Volunteers.

For more information about having your taxes prepared, go to http://lasclev.org/wp-content/uploads/FINAL-Save-Money-File-Taxes-for-Free-2012.pdf

To learn about how Legal Aid’s Low Income Taxpayer Clinic (LITC) helps taxpayers with disputes with the IRS, click here for Legal Aid’s new brochure about our tax practice.

Will the Affordable Care Act affect my Federal Taxes? Close

The Affordable Care Act (ACA) is a new law designed to make health insurance affordable. Under the ACA, the Premium Tax Credit helps reduce monthly premiums.  Additionally, people without health insurance coverage  will incur a penalty when they file their yearly federal tax return, unless they qualify for an exception.

Who is eligible for a tax credit?  People may be eligible to receive the credit if they:

  • are NOT eligible for coverage through an employer or a government plan, e.g., Medicaid;
  • buy health insurance through the Marketplace;
  • have household income between 100 – 400% of the federal poverty level (e.g., individual: $11,690 – $46,760 and for a  family of four: $23,850 – $95,400);
  • do not use the status of Married Filing Separately on their federal tax return (unless they meet the exception for victims of domestic violence); and
  • cannot be claimed as a dependent by another person.[1]

The tax credit reduces the cost of health insurance. Individuals may choose to either give the estimated credit to the insurance company in advance to lower out-of-pocket monthly premiums, or may choose to receive the credit when filing their 2014 federal tax return this year.  The amount of the credit equals the cost of the health care premiums for the household minus the family’s expected contribution.  The “expected contribution” for a family is based on their poverty level, ranging from 100% to 400%; families with the least money are expected to pay the smallest amount toward the cost of health care.

For example, a family of 2 adults and 2 children with household income of $40,000 (170% of poverty) could purchase health care for all 4 family members through the Marketplace for $7,630 per year.  The family could get a credit of up to $5,665.  So, the family might actually pay only $1,965 for health coverage, which equals 4.91% of annual household income.[2]

Who is subject to a tax penalty? Most people must have “minimum essential coverage” to avoid paying a penalty.  “Minimum essential coverage” includes health insurance through an employer, the government, an insurance company or the Marketplace where someone lives.[3]

Some exceptions to the penalty exist in cases of short coverage gaps, hardship, no income tax filing requirement, and others.  For more information on the exceptions see http://www.irs.gov/uac/Individual-Shared-Responsibility-Provision.

For the 2014 tax year, the penalty is $95 per adult, $47.50 per child, or 1% of applicable income, whichever is greater.  The penalty must be paid when filing a 2014 tax return this year.

The open enrollment period to purchase Marketplace health coverage for 2015 ends on February 15, 2015.   However, people can purchase health insurance through the Marketplace anytime a qualifying life event has occurred – such as a change in family size, income, or job situation.

Low-income taxpayers should discuss their personal circumstances with a tax professional before taking any action related to the tax credit or penalties created by the ACA.

 

[1] See http://www.irs.gov/uac/The-Premium-Tax-Credit.

[2] Calculations based on information entered and results provided from http://kff.org/interactive/subsidy-calculator/

[3] http://www.irs.gov/uac/Individual-Shared-Responsibility-Provision

 

 

This article was written by Legal Aid supervising attorney Dennis Dobos, who leads Legal Aid’s Low-Income Taxpayer Clinic.

I am a low-income entrepreneur – can I get legal help with taxes? Close

The Legal Aid Society of Cleveland Low Income Taxpayer Clinic is available to assist self-employed individuals with their federal income tax problems.

Free help and education (including presentations) are available through the Clinic to help low-income entrepreneurs with their IRS issues, including the possibility of referrals for free tax preparation assistance and business advice.

Please contact Anne Sweeney, Managing Attorney for Community Engagement, at Anne.Sweeney@lasclev.org with inquiries about this assistance.

What are my rights as a taxpayer? Close

Dealing with the IRS can be a complicated and involved process. Know your rights as a taxpayer to make the process a little easier. The IRS has adopted a “Taxpayer Bill of Rights,” (see http://www.irs.gov/Taxpayer-Bill-of-Rights). As a taxpayer, you have:

1. The Right to Be Informed. You have the right to know how to follow the tax laws. You are entitled to clear explanations of the law. Anytime you receive a notice from the IRS, the agency must explain its reason for contacting you. If you have questions, call the number located at the top right corner of most notices.

2. The Right to Quality Service. You have the right to prompt and professional assistance when dealing with the IRS. The people you speak with should be respectful, and help you understand the information they provide to you. You have the right to file a complaint for poor service. First, ask to speak with a supervisor.

3. The Right to Pay No More than the Correct Amount of Tax. You have the right to only pay what is legally owed. You can schedule an appointment with your local Volunteer Income Tax Assistance (VITA) site to have your tax returns done by a professional free of charge.

4. The Right to Challenge the IRS and Be Heard. You have the right to disagree with the IRS and to submit documents that support your side. You have the right to receive a quick and fair response from the IRS. You can expect to get a reply from the IRS within 30 days.

5. The Right to Appeal an IRS Decision. You have the right to appeal most IRS decisions when you disagree. You have the right to take your tax case to court.

6. The Right to Finality. You have the right to know how much time you have to challenge the IRS. You have the right to know how much time the IRS is allowed to take to audit a particular tax year and when an audit is complete. In most cases, the IRS can audit the past 3 years of tax returns. In the case of more substantial errors, the IRS can go back 6 years. You should keep at least the last 6 years of tax returns for your records.

7. The Right to Privacy. You have the right to expect that any IRS action will comply with the law and will only be as intrusive as necessary. The IRS will also respect all other rights you are owed.

8. The Right to Confidentiality. You have the right to expect that any information you provide will not be given to anyone without your permission or unless required by law. Only after you sign a release form can your information be shared.

9. The Right to Retain Representation. You have the right to hire a lawyer when dealing with the IRS. You also have the right to know that if you cannot afford a lawyer you may be eligible for assistance from a Low Income Taxpayer Clinic.

10. The Right to a Fair and Just Tax System. You have the right to expect the tax system to consider all facts and circumstances that might affect your ability to pay.

For more information about how these rights apply to you, visit http://www.taxpayeradvocate.irs.gov/About-TAS/Taxpayer-Rights.

 

This article was written by John Sayers and appeared in The Alert: Volume 31, Issue 2. Click here to read a full PDF of this issue!

Where can I get free tax prep assistance? Close

In Northeast Ohio, there are many locations that provide FREE tax prep assistance. Click here for a full listing!

Learn more about how you can save money and file your taxes for free with this Legal Aid brochure.

What can I do about a tax lien on my property? Close

When a homeowner does not pay a tax debt, the Internal Revenue Service (IRS) may impose a tax lien on the taxpayer’s property. The tax lien can have a negative impact on the individual taxpayer and the community. A tax lien gives the federal government a right to the property or money from the sale of the property before anyone else. Additionally, the IRS can seize and sell this property, making it difficult for property owners to manage their property.

The problem for the taxpayer is that a lien prevents owners from selling their property and makes it difficult for them to refinance their mortgages. As a result, the owner may have to pay high interest rates, may not be able to sell a home, and the likelihood of foreclosure increases. For the community, foreclosures decrease the value of nearby homes, discourage spending in the surrounding area, and contribute to other problems associated with vacant and abandoned property.

People struggling with tax debts and who may already have tax liens on their property, have options to address the situation. First, a taxpayer can complete the IRS’s application for a Certificate of Subordination of Federal Tax Lien. This makes the federal government’s interest in the property come after other creditors, such as the bank that holds the mortgage. The successful completion of this application could make refinancing a mortgage possible for a property owner. Refinancing can reduce the owner’s monthly mortgage payments.

Second, a taxpayer can request that the IRS discharge a tax lien, which can allow the sale of property. Though a discharge does not eliminate the lien altogether, it does remove the lien from the specific property being sold and places a lien on other property the taxpayer may own. Property free from liens is much easier to sell.

Finally, a taxpayer that cannot afford to pay tax debt may qualify for an “Offer in Compromise” (OIC). An OIC is an attempt to settle tax debt with the IRS for less than the amount that is actually owed. If the IRS accepts the settlement offer, the taxpayer’s debt — along with liens on property — will be eliminated.

If you have a problem with the IRS, call 1-888-817-3777 to find out if you are eligible for help from Legal Aid’s Low Income Tax Payer Clinic.

By Frank George

Will my tax refund be delayed this year? Close

Changes to the federal tax law may affect when you will receive your federal income tax refund. On December 18, 2015, the federal government enacted a law, “Protecting Americans from Tax Hikes” or PATH. This law extends tax credits for most taxpayers; but, if you claim the Earned Income Tax Credit (“EITC”), PATH changes how and when the credit will be applied.

The EITC was introduced in 1975 as a bipartisan, anti-poverty law to assist those working, as well as to help low to moderate income families, stay above the poverty line. It has been largely successful. According to the National Taxpayer Advocate Service, during 2013, the Earned Income Tax Credit (EITC) lifted about 6.2 million people out of poverty nationwide1.

PATH made permanent an increase in the EITC to $6,242 for working families with three or more qualifying children who earn less than $47, 747 a year for the 2009 through 2017 tax years. While the increase will be beneficial to many low to moderate income families, PATH includes anti-fraud language that places unexpected financial burdens on the same families the EITC was created to assist. Under PATH:

(1) Individuals cannot file an original or amended tax return to claim the EITC for prior years that a qualifying child did not have a Social Security number or individual taxpayer identification number (ITIN).

(2) The IRS can stop an individual from claiming the child tax credit, in addition to the EITC, for 10 years if the IRS finds the individual has fraudulently claimed either credit; and

(3) The IRS will hold refunds due to a taxpayer who claims the EITC until February 15, 2016 in order to help prevent identity theft and refund fraud.

Most refunds will continue to process within 21 days, unless the refund is partially or completely based on the EITC. The IRS will not release partial refunds, so EITC recipients should anticipate their entire refund being held.

The Volunteer Income Tax Assistance (VITA) program offers free tax help to people who generally make $54,000 or less, persons with disabilities and limited English speaking taxpayers who need assistance in preparing their own tax returns. IRS-certified volunteers provide free basic income tax return preparation with electronic filing to qualified individuals. Taxpayers should call 211 to find a convenient VITA site.

1Drumbl, Michelle Lyon (2014) Beyond Polemics: Poverty, Taxes and Noncompliance (Washington
& Lee Public Legal Studies Research Paper Series, Paper No. 9-2016) Retrieved from www.ssrn.com/
abstract=2761083.

By Arcola Whatley

What changes are in store with the new tax laws? Close

Congress recently approved a new tax law that cuts rates for corporations, provides new breaks for private businesses and reorganizes the individual tax code. The official name of the law is: An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (the Act).

The new tax law also removes the penalty for people who do not maintain health insurance coverage beginning January 2019. This means Americans will no longer be required to have health insurance starting in 2019. Many of the provisions in the bill for individuals end after 2025, but the heath care provision continues indefinitely.

The Act retains seven tax brackets, but lowers the rates and increases the thresholds for taxable years 2018 through 2025 as follows:

The new law changes several individual income tax deductions for tax years 2018 through 2025.

  • The standard deduction is doubled to $24,000 for married couples ($12,000 for individuals) and the personal exemption is eliminated.
  • The overall limitation on itemized deductions is eliminated.
  • Taxpayers can only deduct up to $10,000 in total for property, income and sales tax.
  • The child tax credit has increased to $2,000 per child, refundable up to $1,400.
  • The mortgage interest deduction has been limited to $750,000 (existing mortgages are grandfathered up to the current $1,000,000 limit).
  • Interest on home equity loans or home equity lines of credit (new or existing) is no longer deductible.
  • For taxpayers who sign divorce agreements after December 31, 2018, alimony will no longer be deductible by the payor or taxable to the recipient.
  • The medical expense deduction has been retained.
  • The deduction for charitable gifts is retained and expanded to allow taxpayers to deduct up to 60% of their adjusted gross income for gifts of cash to public charities.

Remember to consult with your tax professional or one of the Volunteer Income Tax Assistances (VITA) sites in your community for help with the tax law changes affecting your 2018 federal tax return. For help resolving a dispute with the IRS, contact Legal Aid’s Low Income Tax Payer Clinic by calling 1.888.817.3777. Please note Legal Aid does not prepare tax returns.

This article was written by Dennis Dobos and appeared in The Alert: Volume 34, Issue 1. Click here to read a full PDF of this issue!

 

Brochures

Are You a Low-Income Entrepreneur and Need Federal Tax Help?
If you are a self-employed individual, the only shareholder in
Where can I get free tax prep assistance?
In Northeast Ohio, there are many locations that provide FREE
I have a Federal Income Tax problem – can Legal Aid help?
Legal Aid’s Low Income Taxpayer Clinic (LITC) assists low-income taxpayers in
Tax Help for H2A Workers
Farmers may apply with the U.S. government to hire workers
Filing Taxes Can Help Immigrants
Immigrants should file taxes for several reasons. More information is
Cancelled Debt Flyer
Lost your home to foreclosure? Resolved a different debt problem?
The IRS May Owe You Money through the Earned Income Tax Credit
If you are low-income, you may be eligible for the
Save Money! File Your Taxes for Free!
You can have your taxes prepared for free and get

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You might be able to reduce or avoid paying the

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