Tax Time... Even For The Disabled

Aspects of Need Addressed: Financial

The last thing I thought my son would need to do is file a tax return. He is on SSI and SSD, on Medicare and Medicaid, all due to his disability. He held a part time job for a few months which earned in total about $4100. As is so for most psychiatrically impaired loved ones on disability, my son's economic station compared to the rest of the country is on the lowest rung of the economic ladder. But, it turns out, there is a benefit to filing a tax return even for, indeed especially for, those like him.

Money Back From EIC: Who Knew?

The major benefit is the Earned Income Credit. This is a tax provision which provides cash refunds to certain low and middle income filers even if they don't actually pay any tax. The minimum age to file for an EIC is 25; the maximum is 65. The maximum earned income limit varies depending on marital status and number of children. SSI and SSD are not counted as earned income. Full details about EIC appear in a special IRS Publication, No. 596, "Earned Income Credit." (Of course it is... 68 pages long! How does the IRS expect the mentally disabled to navigate such a long document, and that just for one aspect of the tax code!)

There are 7 basic rules for EIC:

1. A filer's Adjusted Gross Income must be below a certain level.

2. A filer must have a Social Security Number.

3. A filer must not file "Married, Filing Separately". (A filer can be single.)

4. A filer must have been a US citizen or Resident Alien for at least a year.

5. A filer cannot file a Form 2555 (for Foreign Earned Income).

6. A filer's unearned investment income cannot be more than $3100.

7. A filer must have at least some earned income.

There are other rules for those filers who have "qualified children". Since my son is single, this does not apply to him.

There are other rules for those filers without children, like my son. These are:

8. A filer must be between the ages of 25 and 65.

9. A filer cannot be claimed as a dependent by another filer. (This can create an issue for parents of mentally ill loved ones who still live at home, but cannot be claimed as dependents.)

The EIC accrues immediately upon the receipt of even only $1 of earned income, which would create an EIC of $2. The EIC rises to a maximum of $457 for earned income between $6000 and $7500, after which it reduces again to zero when earned income is $13,300. Thus the maximum possible EIC benefit accrues to the filer who has earned income of between $6000 and $7500--which is exactly the kind of filer most psychiatrically afflicted loved ones on disability earning part-time wages tend to be.

My son, being 24, cannot qualify this year. But had he qualified, his Federal EIC for the income he earned from his part-time work, being $4100, would have been $310. The maximum EIC that he could have received as a single filer would have resulted from earned income between $6000 and $7500. That EIC would have been $457 for 2009.

Then there is also State Earned Income Credits, which can increase the amounts of cash returned. Had he been of sufficient age this year, he would have received $80 of EIC from the State of New Jersey.

Unfortunately my son, at 24, just missed the cut-0ff age. But it was good for him to file anyway to get himself recognized in The System of the IRS, so that next year he will be able to establish more easily his bona fides.

Worth The Effort: Other Money Back

Even though he is not old enough for EIC, there are other benefits to him filing his return. As it happens, his disability enables him to claim back moneys deducted at the State level. While the refund of $10 is not so much, it establishes something to which in his disabled status he is entitled. And he was pleased to be able to take advantage of such refunds.

Free Help With Tax Prep

There is another benefit out there of which too many mentally ill loved ones may not know. The AARP (and others) offer volunteer tax filing help. It was a delightful experience. At the Princeton Library today an AARP tax filing volunteer (Mr. Chris Eggert, formerly a banker at Citibank in New York before retirement), worked with my son to file his return. Within 30 minutes all the questions had been asked and answered, and with my son's permission Mr. Eggert pushed the button on his computer to "e-file" my son's return. Done! Now my son has a tax file with his first filed return, which will set him up nicely for next year when, hopefully, he will be back to work, earn a reasonable amount of extra money (without overly burdening his SSI requirements), for which then he might be eligible to receive back, say, about $450 of additional support. With SSI and SSD currently maxed at $695 per month, a "refund" of $450 would be no small matter.