TAX ISSUES FOR DOMESTIC VIOLENCE SURVIVORS: WHAT ADVOCATES NEED TO KNOW

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1 Susanna Birdsong, Fellow, NWLC TAX ISSUES FOR DOMESTIC VIOLENCE SURVIVORS: WHAT ADVOCATES NEED TO KNOW Shaina Goodman, Policy Manager, National Resource Center on Domestic Violence Jamie Andree, Attorney, Indiana Legal Services

2 WE ARE GOING TO COVER: When Survivors Need to File a Tax Return Some Filing Status Issues Federal and State Tax Credits The Affordable Care Act s Premium Tax Credit Tax Rights Everyone Has Ways Low-Income Taxpayer Clinics Can Help with Controversies Options for People Who Can t Pay Their Taxes Ways to Get Out of Joint Responsibility for Assessments and Penalties Flowing from Married Filing Jointly Returns Injured Spouse Innocent Spouse Reasonable Cause How Advocates Can Help Resources

3 SURVIVORS NEED TO FILE A TAX RETURN When they have over a certain amount of income Their own income (wages, salary or other taxable income) To receive tax benefits To establish separate tax existence

4 SOME FILING STATUS ISSUES Filing status choices: Single Married Married Filing Separately (MFS) Head of Household (HOH) Qualifying Widow(er) with a Dependent Child Marital status is whatever it was on the last day of the taxable year (unless a spouse died during the year)

5 SOME FILING STATUS ISSUES Survivors don t have to file jointly, if married: Can use HOH (and get the favorable HOH rates) if supporting a related dependent for more than half the year and either Single; or Separated and the spouse was not a household member for the last 6 months of the year What s the difference between HOH and MFS? MFS will disqualify them from the federal Earned Income Tax Credit (EITC) and Child and Dependent Care Tax Credit Different definition for state tax relief, but same idea

6 IMPORTANT FEDERAL TAX CREDITS Domestic violence survivors should know about four federal tax credits: The federal Earned Income Tax Credit The federal Child Tax Credit The federal Child and Dependent Care Tax Credit The Premium Tax Credit (to help purchase health insurance under the Affordable Care Act) * Tax filers can receive all of these tax credits if they are eligible*

7 TAX CREDITS CAN BE WORTH A LOT Filing for her 2014 taxes, an unmarried working woman with three children and childcare expenses, who earned $16,000 in 2014, could receive: Up to $6,143 from the federal EITC Up to $3,000 from the federal Child Tax Credit Up to $2,100 from the federal Child and Dependent Care Tax Credit.

8 AND MANY STATES OFFER TAX CREDITS TOO In 2014: 24 states offer EITCs; 26 states offer child care credits; and 3 states offer child tax credits.

9 TAX REFUNDS CAN HELP SURVIVORS SAVE! Refunds can be used to: Create an emergency fund or build up savings Put funds into a bank account through direct deposit or into a savings bond Open bank accounts and build assets. Many EITC coalitions can help survivors with this. Establish matched savings programs for survivors

10 BUT TAX REFUNDS CAN BE OFFSET If a survivor (and/or her spouse if they have filed jointly) Owes taxes from a prior year; Owes child support; Is in default on a student loan; or Owes certain other debts to the government. We explain later how a survivor can protect her share of a refund from being taken to pay her spouse s debts.

11 THE FEDERAL EARNED INCOME TAX CREDIT (EITC) The federal Earned Income Tax Credit is a wage supplement for low-to-moderate income workers. For Tax Year 2014 it is worth Up to $6,143 for a survivor with three or more children who earned less than $46,997 ($52,427 if married filing jointly). Up to $5,460 for a survivor with two children who earned less than $43,756 ($49,186 if married filing jointly). Up to $3,305 for a survivor with one child who earned less than $38,511 ($43,941 if married filing jointly). Up to $496 for a survivor without qualifying children who earned less than $14,590 ($20,020 if married filing jointly).

12 REQUIREMENTS FOR THE EITC A survivor must: Have some earned income This can include combat pay. The filer can have unemployment income or other benefits, but needs at least some earnings. Be a citizen, legal resident, or married to one Have a valid social security number

13 CLAIMING CHILDREN FOR THE EITC Child must: Be related to the survivor, adopted, or a foster child Live with the survivor for more than half the year Be under age 19 (age 24 if a student, no age limit if the child is disabled)

14 THE FEDERAL CHILD TAX CREDIT (CTC) The federal Child Tax Credit is intended to help offset some of the costs of raising children. A survivor can claim up to $1,000 per child, no matter how many children she has. Example: Jane is a single mom with two children who earned $8,500 in She can claim a $2,000 Child Tax Credit. But the credit will be reduced if the survivor s income is more than a certain amount.

15 CLAIMING CHILDREN FOR THE CTC A child who is claimed must meet relationship and residency requirements for the EITC and: Be age 17 or under AND Be claimed as a dependent by the survivor A child who is claimed also must be: A U.S. citizen, or A U.S. national, or A resident alien

16 CHILD TAX CREDIT REFUND If a survivor does not owe enough taxes to use all of her Child Tax Credit, she may be eligible for a refund. The survivor will receive either: 15% of her income above $3,000 or the amount of the Child Tax Credit that exceeds her tax liability, whichever is less Example: Susan is a single mom with one child, and earned $8,500 in She had no income tax liability. She will receive a refund of $825 from the Child Tax Credit.

17 THE FEDERAL CHILD AND DEPENDENT CARE TAX CREDIT The Child and Dependent Care Tax Credit can help meet the cost of care for dependent children under age 13 OR disabled dependents and/or spouses who live with the survivor. Any kind of paid child care, including before- and after-school care, summer day camp, center, family day care, or in-home care, can be claimed. The care must be employment-related that is, the survivor must use the child or dependent care so that she can work or look for work.

18 HOW THE CHILD AND DEPENDENT CARE TAX CREDIT WORKS Survivors get a percentage of eligible expenses, based on income. Example: Maria has $15,000 in income, and paid $1,500 in child care expenses in Her Child and Dependent Care Tax Credit is $525. Worth a maximum of $2,100 for two children or dependents and $1,050 for one child or dependent This credit is not refundable, but it reduces tax liability and can increase refund from other credits.

19 ELIGIBILITY FOR OTHER BENEFITS Will refunds from the federal credits affect a survivor s eligibility for other benefits? NO. Refunds received by low-income filers will not count as income for eligibility determinations for federally funded public benefits programs (like TANF, SNAP, SSI). Any savings contributions from refunds will also be excluded from determining benefit eligibility for 12 months following the receipt of the refund.

20 THE CHEAT SHEET The credit To be eligible, a family needs Age of qualifying children Maximum credit value EITC Earned income not more than $52,427 for a married couple with 3 kids Under 19, or under 24 if a fulltime student $6,143 CTC $3,000 in earned income for refund Under 17 $1,000 per child CDCTC Work-related child care expenses Under 13 $2,100

21 HOW TO CLAIM THESE CREDITS A survivor must: File a federal and state tax return Filers with children must file using IRS Form 1040 or 1040A, but not 1040 EZ. File a separate form for each tax credit. States have different forms and procedures for claiming state tax credits. Survivors may also be able to file or correct returns for tax years prior to 2014.

22 PREMIUM TAX CREDIT HELPS FAMILIES PAY FOR HEALTH INSURANCE The Affordable Care Act the health care law sometimes called Obamacare is making health coverage more affordable and easier to obtain for millions of American women and their families. In the first year alone, 8 million people signed up for health insurance through the Marketplace. 85% of them received financial assistance to help cover the monthly cost.

23 2015 ENROLLMENT The 2015 open enrollment period when anyone will be able to sign up for health insurance or to change their current plan runs until February 15, Outside of open enrollment, people may qualify for special enrollment periods if they experience certain life events such as marriage, the birth or adoption of a child, or a job change. Questions about enrollment? Go to healthcare.gov or call (800)

24 PREMIUM TAX CREDIT: FINANCIAL ASSISTANCE TO HELP PEOPLE BUY HEALTH INSURANCE Available as soon as individuals and families sign up for health insurance. Amount is based on household income and family size. Paid directly to health insurance company each month. When families file their tax return, their final Premium Tax Credit will be calculated. Although there is a requirement that married individuals file their taxes jointly to receive the Premium Tax Credit, there is an exception to this rule for survivors of domestic violence. Families should report any changes in income or family size to the Health Insurance Marketplace throughout the year, because that may affect their Premium Tax Credit.

25 PREMIUM TAX CREDIT: HOW DO PEOPLE QUALIFY AND HOW MUCH ASSISTANCE DO THEY RECEIVE? People with household incomes between % of the federal poverty line are eligible (between $23,850 and $95,400 for a family of four). Designed so that individuals and families spend no more than a certain percentage of their income on health insurance, using a sliding scale. The Premium Tax Credit covers the difference between the actual cost of the health insurance plan and the family s contribution.

26 EXAMPLE: THE SMITH FAMILY Maria, her 10 year old daughter, and 7 year old twin sons have a household income of $47,700 (200% FPL) and want to purchase the silver benchmark health insurance plan. At this income level, Maria will contribute no more than 6.3% of her annual income or $3,005 toward her family s health insurance premium. The total annual premium for the benchmark health insurance plan in their area is $9,000. Therefore their annual Premium Tax Credit is worth $5,995 ($9,000-their contribution of $3,005), or $500 a month. Every month, their insurer will be paid the $500 Premium Tax Credit directly, and Maria will be responsible for paying the insurer the remaining $250 a month.

27 PREMIUM TAX CREDIT: TAX YEAR 2014 If a survivor received a Premium Tax Credit in 2014, she will report that on the tax return that she files in The Health Insurance Marketplace will give information regarding her Premium Tax Credit to the IRS. Then the projected 2014 income and household size that she provided when she signed up for health insurance will be reconciled with her actual 2014 income and household size. Remember to update the Marketplace with any changes in income or household size that occur throughout the year don t wait until tax time!

28 PREMIUM TAX CREDIT: IMPORTANT REMINDERS Sign up for health insurance! Encourage survivors who don t have health insurance to sign up at or (800) until February 15, Financial assistance is available! Let individuals and families know that the Premium Tax Credit can help them afford their monthly health insurance premium! Keep information up to date. Survivors should report any change in income or family size to the Marketplace throughout the year to avoid receiving too much or too little financial assistance. If survivors used a Premium Tax Credit to help pay for health insurance in 2014, they need to file a 2014 tax return.

29 FREE TAX PREPARATION HELP The IRS-sponsored VITA Program offers free tax help to low-to-moderate-income (generally, $50,000 and below) people. The IRS also coordinates with AARP to offer tax help to people of low-to-moderate-income, with special attention to those age 60 and older, through a program called Tax-Aide. Individuals with income below $60,000 can use the Free File Program with free tax prep software.

30 SURVIVORS HAVE THE RIGHT TO: Review and understand the entire tax return (including supporting documents) before signing a joint return. Refuse to sign a joint return. Married people do not have to file joint tax returns! Request an automatic 6-month extension of time to file (IRS Form 4868). Get copies of prior year returns from the IRS.

31 EXAMPLES OF LETTERS THAT IRS MAY SEND TO SURVIVORS The IRS sends letters if: IRS believes, based on reports of income it has received, that a non-filing survivor should have filed a tax return; or IRS is examining a tax return filed by a survivor (individually or with a spouse); or IRS is attempting to collect tax owed by a survivor (individually or with a spouse); or To remind the survivor that tax is still owed even if IRS is not presently trying to collect.

32 PEOPLE WITH IRS CONTROVERSIES Low-Income Taxpayer Clinics can represent low-income individuals (up to 250% of federal poverty guidelines) before IRS when, for example: IRS is examining a survivor s tax return; or A survivor disputes the amount IRS says is owed; or IRS is trying to collect, and the survivor can t pay any or all of what is owed or is experiencing economic hardship.

33 PEOPLE WITH IRS CONTROVERSIES The Taxpayer Advocate Service can act as an internal ombudsman to help survivors when: They are experiencing economic harm or are about to suffer economic harm. They have experienced an unreasonable delay by the IRS when they ve tried to resolve a tax account problem. An IRS system or procedure has either failed to operate as intended, or failed to resolve the problem. The way the tax laws are being administered is unfair or has impaired the survivor s rights.

34 IRS PENALTIES IRS imposes penalties, in addition to tax owed for: Filing a return late when tax is owed for that year; Paying late; and Failing to withhold a sufficient amount of tax during the tax year. Sometimes IRS will remove or abate penalties when the taxpayer can show reasonable cause. Interest owed cannot be abated.

35 HOW DOES IRS COLLECT? IRS collects from taxpayers by offsetting refunds or by levying financial accounts, wages, and even Social Security benefits. IRS sends collection notices first. IRS gives taxpayers the opportunity for a hearing before a levy begins. IRS may file a lien notice to protect its ability to collect from a taxpayer s property.

36 INABILITY TO PAY IRS offers collection options for taxpayers who cannot pay at all or in full. These options include: Currently not collectible status based on economic hardship - IRS will not levy but will continue to offset future refunds to collect the tax; Installment agreements - allow the taxpayer to pay IRS in monthly payments Offer in compromise IRS will accept an amount as payment in full based on a formula that determines the taxpayer s reasonable collection potential. Some tax debts can be discharged in bankruptcy.

37 PROTECTING THE SURVIVOR S SHARE OF A JOINT TAX REFUND When a survivor s spouse owes individual debts (such as child support, federal student loans in default, or even old tax debts), and the survivor files a joint return with the spouse, IRS will ordinarily take the entire refund and apply it to the spouse s individual debts. A survivor can use IRS Form 8379 to get back the survivor s share of the refund that is being applied to the spouse s past due debt. Form 8379 can be attached to the joint return or filed separately. Form 8379 can be used to claim the survivor s share of a prior year s refund so long as the due date for that year s return was less than 3 years ago.

38 WHO IS RESPONSIBLE FOR THE LIABILITY ON A JOINT TAX RETURN? When spouses file a joint tax return, both are responsible for the entire tax liability even if only one of the spouses had income and even if the tax debt is due to the behavior of only one spouse. This is called joint and several liability. Note: It is not a valid joint return if one spouse s signature was forged. It is not a valid joint return if one spouse signed under duress. A survivor alleging duress must show IRS that at the moment the return was signed, the survivor was unable to resist the demands of the other spouse to sign the return, and the survivor would not have signed the return but for the pressure from the other spouse.

39 RELIEF FROM JOINT LIABILITY IRS has a procedure that a survivor can follow (commonly called innocent spouse relief ) to request relief from joint and several liability for a tax debt arising from a jointly filed tax return. There are special rules for granting relief to married persons who live in community property states including those who have not filed joint returns. The rules for innocent spouse relief are very complicated. Survivors should seek legal help!

40 RELIEF FROM JOINT AND SEVERAL LIABILITY BASICS There are three categories of relief: 1. Innocent Spouse Relief which requires: Understated tax on the return due to erroneous items of the survivor s spouse When the return was signed, the survivor did not know or have reason to know of the understatement Taking into account all facts and circumstances, it would be unfair to hold the survivor liable for the understated tax.

41 RELIEF FROM JOINT AND SEVERAL LIABILITY BASICS (CONTINUED) 2. Separation of Liability Relief The IRS will allocate the liability for the understated tax between the survivor and the spouse in approximately the same manner as if the spouses had filed separately. No refunds will be made for tax that has been paid. At time relief requested, must be no longer married to, or legally separated from spouse, or have lived apart from spouse for more than 12 months Survivor can t have actual knowledge of spouse s erroneous items.

42 RELIEF FROM JOINT AND SEVERAL LIABILITY BASICS (CONTINUED) 3. Equitable Relief for survivors who don t qualify for innocent spouse relief or separation of liability. Applies to understatements of tax and underpayments. IRS will consider: Marital status Survivor did not know and had no reason to know that spouse would not pay tax Presence of domestic violence or abuse Economic hardship Whether survivor significantly benefited from understatement or underpayment of tax Survivor s compliance with tax laws Survivor s mental and physical health

43 RELIEF FROM JOINT AND SEVERAL LIABILITY BASICS (CONTINUED) Relief is requested using Form There are time limits for requesting relief so survivors should seek tax help immediately IRS will notify the non-requesting spouse & will give him the right to participate in the process but will not disclose personal information of the survivor More information is contained in IRS Publication 971 Obtaining relief for a survivor can be difficult get legal assistance!

44 TAX TIME CAN HELP SURVIVORS Many survivors face barriers to economic security partner s control of financial resources lack of living wage jobs expensive childcare lack of safe, affordable housing Financial security is connected to personal safety Tax season can help survivors enhance their financial security

45 SURVIVOR-CENTERED ADVOCACY Important to remember the empowerment model and keep survivor-defined advocacy at the center of our work This can be especially difficult when talking about money Financial institutions and the IRS may seem intimidating and inflexible (not just to survivors, but to all of us!) Our role as advocates is to help these systems seem less overwhelming and more accessible to survivors and to help survivors understand the options available to them

46 TAX REFUNDS CAN BE USED TO: Create an emergency fund or build up savings Put funds into a bank account through direct deposit or into a savings bond Manage monthly cash flow by pre-paying regular bills like rent, phone service, etc. Open bank accounts and build assets (many EITC coalitions can help survivors with this) Establish or add money to a matched savings account or IDA

47 ACTIONS FOR ADVOCATES Partner with the VITA sites in your area to help ensure that DV issues are addressed appropriately Partner with ACA assisters in your area to help them understand the special rules for DV survivors Partner with state-wide EITC coalitions Advocate for legislative and policy reforms - National Taxpayer Advocate Service (through IRS) - Submit comments on regulations

48 RESOURCES FOR YOU For filing requirements, filing status, and tax credits, visit For tax credits and tax credits outreach, visit For EITC coalitions in your county, visit the National EITC Partnership website:

49 FREE TAX PREPARATION RESOURCES Call the IRS hotline at or visit to locate a VITA site near you. Call or visit to locate an AARP-sponsored Tax-Aide site near you. For information about Free File, visit

50 FOR MORE INFORMATION ABOUT HEALTH INSURANCE For information about enrolling in health insurance under Obamacare, visit For information about the Premium Tax Credit, visit To shop for plans and enroll, visit

51 RESOURCES FOR SURVIVORS WITH IRS CONTROVERSIES To locate a Low-Income Taxpayer Clinic near you, visit: Taxpayer-Clinics/Low-Income-Taxpayer-Clinic-Map To locate the Taxpayer Advocate Service office nearest you, call