If you or someone you love has been exonerated for a crime and awarded compensation, there’s an important deadline coming up. Dec. 17 is the last day to file for a tax refund under the Wrongful Conviction Tax Relief Act of 2015, which excludes compensation for wrongful convictions from exonerees’ income, essentially making it non-taxable. Many exonerees pay taxes on their compensation when it is unnecessary.
According to the National Registry of Exonerations, there have been almost 3,000 people exonerated of crimes since 1989. On average, each exoneree has spent almost nine years wrongfully imprisoned.
Exonerees can qualify for the refund if they have won a lawsuit or criminal appeal, reached a settlement or received a special award under a federal or state law providing compensation to the wrongfully convicted. The Act also covers people who have been compensated after receiving clemency, a pardon or amnesty due to innocence. The federal government and 33 states have laws that compensate the wrongfully convicted.
Dec. 17 deadline is for refund requests more than 2 or 3 years old
According to the IRS, the exoneree must file a claim for a refund either 1) within three years of the date of the income tax return in which the award was reported; or 2) within two years of paying tax on the award, whichever is later. However, if those deadlines have passed, the wrongfully convicted individual can make a one-time claim if they file by Dec. 17, 2018.
To file for a refund on overpaid tax, you should file an amended federal income tax return (Form 1040X) for the tax year when you reported the income. Write “Incarceration Exclusion PATH Act” across the top of the form. That form should then be mailed to:
333. W. Pershing
Stop 6503 5th Floor
Kansas City, MO 64108
If you have questions about whether you qualify or what the exact process is for obtaining a refund or eliminating future taxes, we recommend consulting with a tax attorney. The Wrongful Conviction Tax Relief Act could result in substantial relief.
Over $2 million recovered by one advocate
Jon Eldan, head of the nonprofit After Innocence, helps exonerated people rebuild their lives in a variety of ways, but he’s working especially hard to get the news out before the Dec. 17 filing deadline.
Eldan says he has screened over 400 exonerees for eligibility for the tax credit. Of those, 13 were able to recoup taxes already paid — a total of $1.6 million — and eliminate almost $500,000 in taxes exonerees thought they owed.