The Internal Revenue Service provides benefits like the Earned Income Tax Credit and the Child Tax Credit, which put extra income in the hands of low-income households. But, the IRS can be scary for people who owe taxes. Low-income tax payers have many options for resolving debts owed to the IRS and may not have to pay back all of the money owed.
Federal Income Tax Help for Low-Income Taxpayers
Federal income tax problem? Legal Aid may be able to help you.
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 with education, negotiation, and litigation.
Click here for the full brochure: Low Income Taxpayer Clinic (LITC)
Are You a Low-Income Entrepreneur and Need Federal Tax Help?
If you are a self-employed individual, the only shareholder in an S Corporation or a single member LLC, the Low Income Taxpayer Clinic (LITC) at Legal Aid may be able to provide you with federal tax assistance and to refer you to others for free assistance with tax preparation and business development. Legal Aid provides free legal services and direction to people, not business entities, whose income is too small to hire a private attorney.
Self-employed individuals have several tax obligations. The self-employed are required to file an annual return and pay estimated tax on a quarterly basis. A penalty may be assessed by the Internal Revenue Service (IRS) if taxes are not paid throughout the year. The IRS has an Electronic Federal Tax Payment System (EFTPS) that makes it easier for self-employed taxpayers to make quarterly payments by allowing a taxpayer to schedule automatic estimated payments up to one year in advance. The IRS also provides a Self-Employed Individuals Tax Center that can be accessed for help at https://www.irs.gov/businesses/small-businessesself-employed/self-employed-individuals-tax-center.
Self-employed individuals also must pay a self-employment tax, in addition to income tax if net earnings are $400 or more. Self-employment tax primarily is a Social Security and Medicare tax for individuals who work for themselves. The tax rate is 12.4% for Social Security and 2.9% for Medicare taxes. It always is a good idea to review the IRS instructions for Schedule SE (self-employment) before preparing and submitting IRS Form 1040. The Social Security Administration uses the information from Schedule SE to figure the self-employed individual’s benefits under the social security program.
Legal Aid’s LITC can assist self-employed individuals with IRS tax problems. Legal Aid can negotiate with the IRS to obtain a reasonable payment plan and/or offer in compromise that may reduce your tax burden; if your current expenses exceed your income, you may qualify for currently not collectible status. When your case must go to court, we can represent you.
After receiving the appropriate guidance, the low-income entrepreneur can establish and maintain his/her own job when there are few labor market options, create wealth and economic security, and achieve upward economic mobility demonstrating success among the 3.6 million existing small businesses.
Legal Aid’s LITC does not prepare and file tax returns. A list of free tax preparers is posted on our website at www.lasclev.org/taxpreplocations. And, learn more about Legal Aid’s tax law practice: www.lasclev.org/get-help/special-programs/low-incometaxpayer-clinic
Tax Help for H2A Workers
Farmers may apply with the U.S. government to hire workers from other countries on temporary work visas called H2A visas. Not all work visas are H2A visas. If you are not sure what kind of visa you have, check your passport or other immigration documents.
H2A workers with questions about taxes or getting an ITIN for a dependent should call The Legal Aid Society of Cleveland. Legal Aid has a Low Income Taxpayer Clinic (LITC) that may be able to help. Please call Legal Aid at 1.888.817.3777.
More information is available in this bilingual brochure published by Legal Aid: Tax Help for H2A Workers / Ayuda con los Impuestos para Trabajadores/as H2A
Filing Taxes Can Help Immigrants
Immigrants should file taxes for several reasons.
More information is available in this brochure published by Legal Aid: Filing Taxes Can Help Immigrants
This brochure is also available in Spanish at: Presentar Declaración de Impuestos Puede Ayudar a los/as Inmigrantes
Consult with a qualified tax preparer or a tax attorney if you have questions about filing tax returns. You may be able to find free tax preparation help by calling 211.
Cancelled Debt Flyer
Lost your home to foreclosure? Resolved a different debt problem? This brief brochure explains that you may not have to pay income tax on cancelled debts such as foreclosure, bankruptcy or insolvency. It also explains the steps you need to take to reduce your taxes.
More information is available in the brochure published by Legal Aid: Cancelled Debt Brochure.
This information is also available in Spanish at: Cancelada.
The IRS May Owe You Money through the Earned Income Tax Credit
If you are low-income, you may be eligible for the Earned Income Tax Credit (EITC). The EITC is a special credit to assist some working people. It can mean a refund for you or a reduction in the amount of income tax you pay.
More information is available in this brochure published by Legal Aid: The IRS may owe you money through the EITC.
This brochure is also available in Spanish at: El IRS puede Deberle Dinero a Través del Crédito por Ingreso Del Trabajo.
Save Money! File Your Taxes for Free!
You can have your taxes prepared for free and get your refund within 10 days.
Find out about free tax preparation in your area:
- Call First Call for Help (dial 211 from your phone); or
- Call the IRS at 1-800-829-1040, or go to www.irs.gov to find information about Volunteer Income Tax Assistance (VITA) programs.
Most people who file their tax return electronically with a free preparer will get their refund direct deposited into their bank account within 10 days – and it is free! Even if you cannot open a checking account, you may be able to have your refund deposited into a savings account.
To learn more click on this link for the Legal Aid brochure: Save Money… File Taxes for Free!
This brochure is also available in Spanish: Ahorre Dinero… ¡Declarar Impuestos Gratuito!
What changes are in store with the new tax laws?
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!
What can I do about a tax lien on my property?
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
What are my rights as a taxpayer?
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!
I am an H-2A worker. May I claim my spouse and/or children as dependents on my tax return?
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 employ H-2A workers. Should I withhold taxes from their pay?
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 employ H-2A workers. Should I give them a 1099 or a W-2?
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
Do H-2A workers have to pay taxes?
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
Filing Taxes Can Help Immigrants
Immigrants should file taxes for several reasons.
More information is available in this brochure published by Legal Aid: Filing Taxes Can Help Immigrants
This brochure is also available in Spanish at: Presentar Declaración de Impuestos Puede Ayudar a los/as Inmigrantes
Consult with a qualified tax preparer or a tax attorney if you have questions about filing tax returns. You may be able to find free tax preparation help by calling 211.
I have a criminal record and need to find work. Are there resources to help me?
New Ohio Law and Federal Programs Help Employers Hire People Returning from Prison
In Ohio there were many laws preventing people with criminal records from working in certain kinds of jobs. In 2012, however, Ohio passed a new law that helps people returning from prison get jobs. Also, there are two federal programs that encourage employers to hire people with criminal backgrounds.
Under the new law people who committed nonviolent offenses can now work as optical dispensers, salvage dealers, hearing aid dealers and fitters, and can obtain licenses in cosmetology and construction. The new law also created Certificates of Qualification for Employment, which can help people get jobs they could not have had before. (More information about CQEs can be found in the article “Certificate of Qualification for Employment: New Help with Jobs for People with a Criminal Record,” in this issue of The Alert.)
The CQE allows employers to hire people whose criminal record would have not allowed them to do the job before. Licensing boards can also grant a license to someone with a CQE who could not have obtained the license before. The CQE protects employers from any negligent hiring claim. There are some limits to using a CQE when applying for jobs in law enforcement, a pain clinic, and health care settings.
Employers can also benefit from programs that support hiring people with criminal backgrounds. First, the Workforce Opportunity Tax Credit (WOTC) can reduce an employer’s federal income tax liability by as much as $2,400 per qualified new worker. There is no limit on the number of new hires claimed and the credit applies to wages paid to full-time, part-time and temporary employees. The employer must complete a one-page form before offering the job and another form within 28 days of hiring an eligible employee.
For more information on how to apply for the WOTC, contact the Ohio Department of Jobs and Families services at 1.888.296.7541, Option 9.
The second program, called Federal Bonding, protects employers financially who hire a job applicant who has a criminal history. Federal bonding reimburses employers for loss of money or property in the event that an employee covered by the bond is dishonest, commits theft, forgery, larceny, embezzlement of property or money. The bond coverage ranges from about $5,000 up to $25,000. The bond insurance is free to the employer. Coverage begins the first day of the applicant’s employment and ends after six months.
For more information on how to access this coverage, contact Ohio’s State Bureau of Quality and Community Partnerships at 614.728.1534.
https://www.hirenetwork.org/content/work-opportunity-tax-credit
http://www.bonds4jobs.com/highlights.html
https://www.hirenetwork.org/content/federal-bonding-program
This article was written by Bishara Addison of Towards Employment and appeared in The Alert: Volume 29, Issue 2. Click here to read the full issue.
I am a senior and a homeowner. Are there any special tax breaks for me?
Ohio’s Homestead Exemption exempts the first $25,000 of the value of your home from being taxed. For example, a home that is worth $100,000 will be taxed as if it were worth $75,000. On average people who qualify save $400 a year.
Who is eligible? Homeowners who:
- Are 65 years old or will turn 65 this year, or
- Were permanently and totally disabled on or before the 1st day of the year in which they file, or
- Are the surviving spouse of a person who was already enrolled in Homestead, and the survivor was at least 59 years old when the spouse died.
What property is eligible for the exemption?
- The property must be the place where you live most of the time, and
- You must have been living there as of January 1st, and
- Your name must be on the deed; if the property is held in a trust, you must have a copy of the trust.
You must apply for the exemption by June 3, 2013. (A late application can also be filed for last year.)
If you apply based on your AGE, you must have PROOF OF AGE. For proof, you can use things like a driver’s license (current or expired), State of Ohio ID card, birth certificate or passport (current or expired).
If you apply based on DISABILITY, you must have PROOF OF DISABILITY. For proof, you can give things like the Auditor’s Certificate of Disability form signed by your doctor OR a statement from Social Security, the Department of Veterans Affairs, the Railroad Retirement Board, or the Ohio Bureau of Workers Compensation finding you to be totally and permanently disabled.
If you are found to be eligible, you do not have to re-apply in future years.
To get an application form, more information and help, call your county Auditor’s Homestead Department:
- In Cuyahoga County, call 216.443.7101
- In Ashtabula County, call 440.576.3793
- In Lake County, call 440.350.2536
- In Geauga County, call 440.279.1617
- In Lorain County, call 440.329.5207
This article was written by Legal Aid attorney Marley Eiger and appeared in The Alert: Volume 29, Issue 1. Click here to read the full issue.
I am a low-income entrepreneur – can I get legal help with taxes?
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.
How does the IRS help with tax preparation, refunds, and fraud?
The Internal Revenue Service (IRS) has made it easier for taxpayers to file their tax returns, as well as to monitor and protect their federal income tax accounts. Here are some examples:
Complete your tax return for free. If your income is below $58,000 – you can use free federal income tax preparation software. It is available online 24/7. The IRS states the process is safe and secure. Refunds may be directly deposited into your bank account. Visit http://www.IRS.gov/freefile for more details.
Obtain tax return and income transcripts at no cost. If you need your past income tax or earnings records, for example, because you are applying for a mortgage or a student loan, you may obtain a copy for free. Tax return and income transcripts may be ordered online, without charge, and delivered electronically or by mail. Taxpayers also may sign and submit to the IRS Form 4506-T or call (800) 908-9946 to obtain their free tax return transcripts. IRS forms can be found at http://www.irs.gov/Forms-&-Pubs.
Monitor the status of your refund. The most up to date information about your refund can be found using the IRS tool “Where’s My Refund?” (http://www.irs.gov/Refunds). Taxpayers also can learn the status of their refund by calling the IRS Refund Hotline at 800-829-1954. If you haven’t received your refund within 20 days of filing an electronic return or six weeks from the time of mailing your paper return, you may contact the IRS at 800-829-1040 and a representative will figure out the status of your refund.
Contact the Taxpayer Advocate Service. If you have a problem with the IRS that you can’t resolve, the Taxpayer Advocate Service (TAS) is available to help you. TAS is an independent organization within the IRS that works on behalf of taxpayers. TAS may help taxpayers who have financial difficulties, who face an immediate threat of adverse action, or who have not heard back from the IRS in response to a question. You can contact the Local Taxpayer Advocate (LTA) at (216) 522-7134 or send Form 911 to the LTA by fax at (855) 824-6409 or by mail to 1240 E. Ninth St., Room 423, Cleveland, Ohio 44199.
Protect yourself from refund fraud related to identity theft. Refund fraud can cause lots of problems for taxpayers. Determine if any of the following problems have occurred:
- More than one tax refund was filed for you for a single tax year;
- IRS records show you received more wages than you actually earned; or
- Your state or federal benefits were reduced or cancelled because the agency received incorrect information concerning a change in your income.
If so, you should immediately act in the following ways to protect yourself from identity theft:
- Contact the IRS Identity Protection Specialized Unit at (800) 908-4490 and complete and submit to the IRS Identity Theft Affidavit Form 14039;
- Notify your local police department to make a report;
- Contact the Federal Trade Commission (FTC) through its Identity Theft Hotline at www.consumer.ftc.gov or by calling (877)438-4338; and,
- Contact the three major credit bureaus: Equifax – www.equifax.com or (800) 525-6285; Experian – www.Experian.com or (888) 397-3742; and, TransUnion – www.transunion.com or (800) 680-7289 to tell them you were a victim of identity theft.
Guard against tax preparer abuse. If you believe your tax return was not prepared correctly, immediately complete and submit to the IRS Form 14157. Fraud by tax preparers occurs when the preparer claims inflated personal or business expenses, false deductions, unallowable credits and/or excessive exemptions on returns prepared for their clients. For suspected cases of fraud, contact the Ohio Attorney General at 800-282-0515, local law enforcement agencies and an attorney who specializes in civil litigation who will counsel you on your rights and remedies.
This article was written by Legal Aid Supervising Attorney Dennis Dobos and appeared in The Alert: Volume 30, Issue 3. Click here to read a full PDF of this issue!