Once they are incarcerated, many prisoners do not earn enough in wages to meet the minimum income requirements for filing federal income tax returns. However, many inmates do have a legitimate need to file income tax returns due to income earned before incarceration, joint income tax returns with spouses or tax obligations associated with investment income. Others file fraudulent returns in an attempt to swindle the system.
Minimum Income Levels
Although many federal and state prison inmates work and collect wages, their individual wages are often much less than $1 per hour, well below the minimum income threshold for liability for federal income taxes. These limits vary each year, for 2010 the minimum for a single taxpayer under age 65 was $9,350. However, taxpayers must also file returns in order to collect tax refunds and tax credits such as the Earned Income Tax Credit (EITC), although inmates' wages are not eligible for EITC credit.
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Nonresident and Part-Year Resident
Inmates who are have been newly incarcerated in prisons outside their home states may need to file nonresident or part-year resident state income tax returns for the first year of incarceration, depending on their particular circumstances. For instance, an inmate who lived in New York before being convicted of criminal charges, but was transferred to federal prison in Pennsylvania, may need to file income tax returns in both states. The exact requirements for each state vary; inmates would need to consult with their attorneys or advocates for specific advice on their particular circumstances.
Tax Filing Procedure
Most prisons supply basic tax forms for inmates. In addition, most federal and many state income tax forms are available on the Internet, although inmates may have limited access to printers. Inmates who need to file joint income tax returns could complete their information, then forward the form to their spouses or legal representatives to complete the process. Because of the necessity of transmitting forms by mail or waiting for spouses or legal representatives to visit, it is advisable to allow extra lead time to complete the tax return filing process.
Inmate Tax Fraud
Inmates across the country were responsible for more than $130 million in tax fraud in 2009, CBS News reports. Despite earning incomes of pennies per hour, unscrupulous inmates used tax forms supplied by prison facilities to file fraudulent tax returns claiming credits ranging from a few hundred dollars to more than $8,000. These losses were the result of 45,000 fraudulent returns. The IRS was successful in catching 87 percent of all attempted tax fraud cases by prison inmates in 2009, recovering approximately $256 million, according to the "Atlanta Journal-Constitution."
- My Dollar Plan: How Much Money Do You Have to Make to File Taxes?; 2011
- TurboTax Support: How do I File a Nonresident State Tax Return?; Februrary 2011
- Internal Revenue Service: Topic 311 -- Power of Attorney Information; March 2011
- CBS News: Inmates Commit $130 Million in Tax Fraud in 2009; Armen Keteyian; December 2010
- "Atlanta Journal-Constitution": Georgia Inmates File Bogus Tax Returns; February 2011
- Federal Bureau of Prisons: Work Programs
- Internal Revenue Service: Form 2848 -- Power of Attorney and Declaration of Representative