IRS publishes guidelines on tax relief for wrongfully incarcerated people

The IRS on Thursday released guidelines about how those who had been wrongfully incarcerated and previously paid taxes on their restitution can get refunds as a result of a new law.

The agency posted a set of frequently asked questions about the new tax exclusion on its website.

Under the tax extenders package passed in December, people who received civil damages, restitution or other compensation due to wrongful incarceration can exclude the money from their federal income taxes. People who previously paid taxes on restitution can request to get that money refunded by Dec. 19.

To get a refund, taxpayers should file an amended income tax return for any year that they reported compensation for wrongful imprisonment and write “Incarceration Exclusion PATH Act” at the top of the forms. The returns should be mailed to a special address. Taxpayers requesting the refund should allow up to 16 weeks for their request to be processed, the IRS said.

The extenders-law provision on tax relief for the wrongfully imprisoned is based on legislation sponsored by Reps. Sam Johnson (R-Texas) and John Larson (D-Conn.). In January, the congressmen had urged the IRS to quickly implement the law.

Johnson said Thursday that he was concerned that those who were wrongfully convicted will only have a short amount of time to request refunds.

“The simple facts are that the IRS waited until halfway through June to release guidelines, these guideline are not easily found on the website, and the deadline for individuals to file a return is December 19, 2016,” he said. “Time is of the essence, and folks who have been wrongfully convicted and incarcerated deserve better.”

Larson said he was pleased to see the FAQ and hoped that the IRS “will do everything possible in the days ahead to spread the word about this important development to ensure that every eligible person is able to take advantage of this opportunity.”

“Americans who served time in prison for crimes they did not commit have suffered enough, and did not deserve to pay a federal tax on the compensation they received,” he said.