At the 2023 May Meeting in Washington, D.C., the Pro Bono & Tax Clinics committee presented a panel on tax issues faced by incarcerated taxpayers titled The Prisoner’s Tax Dilemma. The panel was moderated by Justin Schwegel, Tax Clinic Director at Gulfcoast Legal Services. It included Tax Court judges the Hon. Elizabeth Ann Copeland and the Hon. Christian N. Weiler, William Gregg from IRS Office of Chief Counsel, Phillip Colasanto from Agostino & Associates, P.C., and myself. This report presents some of the key takeaways from that panel discussion.
Challenges to Pro Bono Work Due to Incarcerated Status
There are various challenges in working with incarcerated taxpayers, especially those who have cases before the Tax Court. The main challenges include the difficulties of communication with the taxpayers (often done by mail), document exchange and conducting hearings or trials before the Tax Court. The latter was particularly difficult prior to the pandemic, in that the Tax Court travelled to hold its trials in the taxpayers’ facilities. The judges recognized one good procedural change that came out of the COVID-19 pandemic: the ability for the Tax Court to conduct remote trials over Zoom with incarcerated taxpayers.
Stimulus Fund Woes for Incarcerated Taxpayers
One of the major issues incarcerated taxpayers currently face is the difficulty in obtaining their stimulus funds issued during the COVID-19 pandemic. The Service initially issued a FAQ claiming that incarcerated individuals were not eligible for the stimulus refunds and attempting to clawback any such refunds already provided to incarcerated taxpayers, but that changed due to the Scholl v. Mnuchin
Shortly after the District Court’s opinion in Scholl enjoining the Service from denying Economic Impact Payments to incarcerated taxpayers, my low-income taxpayer clinic started receiving letters from incarcerated taxpayers seeking assistance to help them secure the much-needed stimulus funds they are eligible to receive post-Scholl. Low-income taxpayer clinics continue to receive stacks of letters requesting assistance from incarcerated taxpayers in these matters. With the deadline for claiming refunds for the 2020 Recovery Rebate Credits fast approaching in April 2024, these taxpayers will need assistance to claim their refunds within the next year.
The reasons why these taxpayers have not yet received their stimulus payments are myriad and not easy to resolve while they are incarcerated.
One of the most common issues facing incarcerated taxpayers is the need to verify their identity for the Service to process their tax returns. Many incarcerated taxpayers filed a return for the first time ever in 2020 and 2021 to claim the Recovery Rebate Credits, which unfortunately resulted in the returns being flagged for further identity verification. The letters taxpayers received, typically a 5071C or 6331C, instruct a taxpayer to verify their identity in one of two ways: online or byBut this population lacks access to the internet or the telephone for the length of time required to wait on hold to verify their identity. Furthermore, many taxpayers are not aware that they need to verify their identity because they did not receive the letter from the Service with instructions, often because they move frequently between facilities.
The IRS website instructs incarcerated taxpayers who receive an identity verification letter to coordinate with their prison official to respond to theIn April 2021, the Service sent letters to prison officials with instructions on how to assist taxpayers with verifying their identity by sending certain information to an email address, Some prison systems, including the California Department of Corrections and Rehabilitation (CDCR), developed an internal process to facilitate identity verification by creating a form that taxpayers complete and submit to CDCR for processing. However, in my experience, most incarcerated taxpayers are not aware of the processes to verify their identity through their prison officials.
Other common issues this population is experiencing in obtaining their stimulus checks include fraudulent tax returns filed to claim the refunds, offset of the refunds due to non-IRS debt, retrieving refunds that were initially issued on pre-paid debit cards or were otherwise returned to sender by the facility, resolution of multiple tax returns filed to claim the refunds, theft of the refunds, and denial of the refunds because they were claimed as a dependent on someone else’s tax returns.
A Call for Help
A key takeaway from the panel was that this population would benefit from pro bono representation before the Service and the Tax Court to help facilitate resolution of the cases. Some cases related to taxpayers seeking to obtain their stimulus funds could be resolved with a simple call to the Practitioner Priority Service to request the refund be reissued or to initiate a refund trace, while others, particularly cases before the Tax Court, may need more long-term representation.
The Pro Bono & Tax Clinics Committee anticipates holding a virtual training later in 2023 that will give prospective volunteers the tools they need to help effectively represent this population. If you are interested in attending the training or assisting in one of these matters, please email me at [email protected].