The Internal Revenue Service has released new guidelines on how wrongfully incarcerated taxpayers can take advantage of a new retroactive exclusion from income for any civil damages, restitution or other monetary award that they received in connection with their incarceration.
The guidelines are contained in a set of
The new wrongful-incarceration exclusion was included in the Protecting Americans from Tax Hikes (PATH) Act enacted last December. The legislation provides a special one-year window during which an eligible wrongfully-incarcerated individual can file a refund claim based on any civil damages, restitution or other monetary award received and reported in a prior tax year, even if the normal statute of limitations had already expired for that year. Without this special provision, refund claims for tax-years 2012 and earlier would be barred in most cases. The deadline for mailing a claim under this special rule is Dec. 19, 2016.
To ensure efficient, consistent processing, the IRS has established a special filing address for amended returns claiming the wrongful incarceration exclusion. Send these
Internal Revenue Service
333 W. Pershing,
Stop 6503 5th Floor,
Kansas City, MO 64108.
The IRS advised taxpayers who qualify for the exclusion to allow up to 16 weeks for processing. In most cases, taxpayers can then use the
Under the new law, there are no reporting requirements for receipt of an award qualifying for the wrongful-incarceration exclusion. This means for the year an award is received, recipients need not report the award on their return (
The FAQs, now available on IRS.gov, provide further details on who qualifies for the exclusion, payments that qualify and the documentation and recordkeeping requirements that apply.