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IRS issues guidance on how to claim refund for taxes paid on restitution for wrongful incarceration
Posted in Tax and Finance
IRS issues guidance on how to claim refund for taxes paid on restitution for wrongful incarceration

Included in the 2015 passage of the Protecting Americans from Tax Hikes (PATH) Act was a provision preventing the Internal Revenue Service (“IRS”) from taxing restitution or civil damages awarded to individuals determined to be wrongfully incarcerated. The law also applies retroactively, so those who paid tax on such awards at any time in the past are entitled to refunds of that tax.

The IRS has issued new guidance (in the form of Q & A) on how taxpayers who qualify can benefit from this law. Individuals who previously paid tax on restitution payments should file a refund claim by filing a Form 1040X for each year they paid tax. On the top of each form, taxpayers should write “Incarceration Exclusion PATH Act.” Taxpayers may file a refund claim for any year in which they paid the tax; their claim is not barred by the typical three-year statute of limitations. However, in order to receive a refund for years outside of this three-year window (which would include any tax year prior to 2013), taxpayers must file for a refund by December 19, 2016.

Taxpayers with additional questions should contact a tax professional.

For more information regarding this new law, please see:

"New law grants tax relief to the wrongfully incarcerated; refunds for taxes paid on past awards available for one year"

Wrongful Incarceration FAQs

To learn more about Ross D. Cohen and his practice, please visit his profile.

To learn more about Bailey Roese and her practice, please visit her profile.

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  • Associate

    Selected as a Kentucky Super Lawyers® Rising Star for 2018 and 2019 in the area of Tax Law, Bailey represents taxpayers in federal, state, and local tax controversies as a member of the Firm’s Tax & Employee Benefits practice ...

  • Partner

    Ross D. Cohen serves as Co-Leader of the Federal Tax Team and concentrates his practice on federal tax transactional and planning issues of partnerships, joint ventures, limited liability companies and S and C corporations.

    With ...



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