Tax Tips for Individuals with Disabilities and Their Families

Income
If the only income you received during the year was your social security or equivalent tier 1 railroad retirement benefits, your benefits generally are not taxable and you probably do not have to file a return. Social security benefits do not include Supplemental Security Income (SSI) payments, which are not taxable. Do not include these payments in your income.

Other Payments
You may receive other payments that are related to your disability. The following payments are not taxable:

• Benefit payments from a public welfare fund, such as payments due to blindness.
• Workers’ compensation for an occupational sickness or injury if paid under a workers’ compensation act or similar law.
• Compensatory (but not punitive) damages, for physical injury or physical sickness.
• Disability benefits under a “no-fault” car insurance policy for loss of income or earning capacity as a result of injuries.
  

Impairment-Related Work Expenses
If you are an employee and have a physical or mental disability that functionally limits your employment, or a physical or mental impairment that substantially limits one or more of your major life activities, you may be able to claim impairment-related work expenses. These are your allowable business expenses for attendant care at your workplace and other expenses in connection with your workplace that are necessary for you to work. Publication 502, Medical and Dental Expenses, contains more detailed information.

Medical Expenses
You can deduct medical and dental expenses for you, your spouse, and your dependents. Medical expenses include payments you make for the diagnosis, cure, mitigation, treatment, or prevention of disease and for treatment affecting any part or function of the body. They also include the cost of transportation for needed medical care and payments for medical insurance. For more detailed information, see Publication 502, Medical and Dental Expenses.

Child and Dependent Care Credit
If you pay someone to care for either you or dependent under age 13, or your spouse or dependent who is not able to care or himself or herself, you may be able to get a credit of up to 35% of your expenses. To qualify, you must pay these expenses so you can work or look for work. Publication 503, Child and Dependent Care Expenses, contains more detailed information.

Credit for the Elderly or the Disabled
You may be able to claim this credit if you are 65 or older or if you are under 65 and you retired on permanent and total disability. Publication 524, Credit for the Elderly or the Disabled, contains more detailed information.

Earned Income Tax Credit
This credit is based on the amount of your earned income. But you can get the credit only if your earned income for 2007 was less than:

• $12,590 ($14,590 for married filing jointly) if you did not have a qualifying child,
• $33,241 ($35,241 for married filing jointly) if you had one qualifying child, or
• $37,783 ($39,783 for married filing jointly) if you had more than one qualifying child.
  

A qualifying child must be under age 19 at the end of 2007, or a full-time student under age 24 at the end of 2007, or permanently and totally disabled at any time during 2007, regardless of age. Publication 596, Earned Income Credit (EIC), contains more detailed information.

How to Get Tax Help
You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. By selecting the method that is best for you, you will have quick and easy access to tax help.

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should.  You can contact the TAS by calling the TAS toll-free case intake line at 1-877-777-4778 or TTY/TDD 1-800-829-4059 to see if you are eligible for assistance. For more information, go to www.irs.gov/advocate.

Free tax services: To find out what services are available, get Publication 910, IRS Guide to Free Tax Services. It contains a list of free tax publications and describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics.

Accessible versions of IRS published products are available on request in a variety of alternative formats for people with disabilities.

You can access the IRS website at www.irs.gov, 24 hours a day, 7 days a week.

E-file your return: Find out about commercial tax preparation and e-file services available free to eligible taxpayers.

Check the status of your 2007 refund. Click on “Where’s My Refund” on IRS.gov. Wait at least 6 weeks from the date you filed your return (3 weeks if you filed electronically). Have your 2007 tax return available because you will need to know your social security number, your filing status, and the exact whole dollar amount of your refund.

You can download forms, instructions, and publications; order IRS products online; research your tax questions online; search publications online by topic or keyword; sign up to receive local and national tax news by email; get information on starting and operating a small business.

Many services are available by phone: Call 1-800-829-3676 to order current-year forms, instructions, and publications, and prior-year forms and instructions. You should receive your order within 10 days. Call the IRS with your tax questions at 1-800-829-1040. You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. Call your local Taxpayer Assistance Center for an appointment. To find the number, go to www.irs.gov/localcontacts or look in the phone book under "United States Government, Internal Revenue Service."

Tax Benefits for Businesses Accommodating Persons with Disabilities

The Disabled Access Credit provides a non-refundable credit for small businesses that incur expenditures for the purpose of providing access to persons with disabilities. An eligible small business is one that that earned $1 million or less or had no more than 30 full time employees in the previous year; they may take the credit each and every year they incur access expenditures. Refer to Form 8826, Disabled Access Credit, for information about eligible expenditures.

The Architectural Barrier Removal Tax Deduction encourages businesses of any size to remove architectural and transportation barriers to the mobility of persons with disabilities and the elderly. Businesses may claim a deduction of up to $15,000 a year for qualified expenses for items that normally must be capitalized. Businesses claim the deduction by listing it as a separate expense on their income tax return. Also, businesses may use the Disabled Tax Credit and the architectural/transportation tax deduction together in the same tax year, if the expenses meet the requirements of both sections. To use both, the deduction is equal to the difference between the total expenditures and the amount of the credit claimed.

The Work Opportunity Credit provides eligible employers with a tax credit up to 40 percent of the first $6,000 of first-year wages of a new employee if the employee is part of a “targeted group.” An employee with a disability is one of the targeted groups for the Work Opportunity Credit, provided the appropriate government agencies have certified the employee as disabled. The credit is available to the employer once the employee has worked for at least 120 hours or 90 days. Employers claim the credit on Form 5884, Work Opportunity Credit.

For 2007, there are new Work Opportunity Credit rules for veterans with a service-related disability. The first-year wages taken into account for qualified veterans with disabilities who were hired after May 25, 2007 is increased to $12,000. See the “What’s New” section of Form 5584 for 2007.

Many businesses mis-classify workers in a Sheltered Workshop as independent contractors when they really are employees. Revenue Ruling 65-165 discusses the treatment of such workers in each of the following categories:

• Individuals in training in a rehabilitation program designed to prepare them for placement in private industry. The intent of the training, which averages 16 weeks in length, is to accustom the individual to industrial working conditions. These individuals are not employees of the workshop for Federal employment tax purposes while they are being trained.

• Regular workshop employees who have completed training and are capable of performing one or more jobs in the sheltered workshop temporarily if awaiting placement in private industry or permanently if unable to compete in regular industry. These individuals are paid by the workshop that provides working conditions and pay scales comparable to those in private industry, and fixes working hours and production schedules so an employment relationship is intended. The trained workers in the workshop are employees for Federal employment tax purposes.

• Individuals working at home that are incapable of working in the workshop that are able to produce salable articles and may sell them wherever they please. These individuals are not considered employees as no employer-employee relationship exists under the usual common law rules.