IRS Debt Forgiveness for Disability, Are You Qualified?

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If you are disabled and unemployed or recently became disabled, there is a good chance the IRS will be willing to work with you. The best course of action is to contact a professional tax relief company that can advocate on your behalf.

There are several IRS Debt Forgiveness programs that can help you.

The two most likely options for disabled people are to file form 982, which is the form used when seeking debt forgiveness because of disability or applying for information reporting in lieu of tax (IRLIT).

There are several things you will need in order to apply for the form 982 program, and only a tax relief company can help you obtain them in a timely manner: A letter explaining your disability and how it has affected your income.

This is why the first step to take should be to contact a professional tax relief company.

Your most recent return, along with all supporting forms and schedules for the year you are filing form 982. This must be an accurate reflection of what your final adjusted gross income (AGI) was for the year.

Your most recent pay stubs and employer W-2 forms for the tax period of your 982 application. This must reflect what your final adjusted gross income (AGI) was for the year.

IRS Debt Forgiveness for Disability Program

IRS Debt Forgiveness for disability program is an assistance program that is intended to provide debt relief for those who became disabled during the time they were paying their federal taxes.

The American Taxpayer Relief Act of 2012, also known as ATRA, was signed on Jan 2nd, 2013, and included a provision that allows taxpayers to claim a total refund of all federal income tax paid in the last 3 years if a taxpayer is considered disabled.

The IRS will review all claims for disability tax debt relief and they will only deny them under the following circumstances:

  1. The medical records do not support a clear diagnosis of a qualifying condition.
  2. The taxpayer did not experience the onset of the disability before the end of the tax year. For example, a taxpayer returns from a military deployment and discovers that they have a condition that qualifies them for disability tax relief. They file for this relief during the following year, but because they did not experience the onset before the end of the tax year, their claim will be denied.
  3. The taxpayer does not cooperate with IRS requests to provide medical records or other documents which support the claim.

Are You Disabled and Qualified for IRS Debt Forgiveness?

When it comes to determining whether or not a taxpayer is disabled there are several factors that will be considered by the IRS:

  1. Whether the taxpayer has any form of income (earned, unearned, taxable interest).
  2. The level of impairment and what type of impairment they have (blindness, deafness).
  3. The implications of the disability for their ability to do the job they had during the year in question.
  4. Whether or not they are able to perform any other type of work, whether there is a substantial gainful activity that they can still carry out.

In order to qualify for disability tax relief, taxpayers must be able to provide the IRS with proof that they became impaired during the tax year in question.

There are several types of proof that may be accepted, though it must show the onset date and continue until the end of the tax year in question:

  1. An award letter notifying you that you were approved to receive Social Security disability benefits or Supplemental Security Income benefits.
  2. Medical records which confirm a diagnosis of a significant medical impairment that is expected to last for at least 12 months or result in death.
  3. Records from the Veteran Affairs Administration evidencing a 100% permanent and total service-related disability.
  4. A letter from your doctor or other health care professional, along with a statement from that professional confirming the onset date and duration of the impairment.

If you meet all of these qualifications, then your claim for IRS debt relief will be processed in accordance with the American Taxpayer Relief Act of 2012. For further details or clarification on any part of this process, please consult a tax preparer or financial advisor.

Important Note You Need to Know About IRS Debt Forgiveness for Disability Program

A taxpayer must be considered permanently and totally disabled to qualify for the disability tax credit (DTC).

The main difference between a Schedule 1 and a Form T2201, Disability Tax Credit Certificate is that the DTC form verifies a person’s condition as incurable and the disability as a severe impairment.

The EAP is a free service offered through your employer, even if you are not presently employed. They offer guidance to those who may consider filing for bankruptcy or those who simply need credit counseling.

The EAP typically includes a variety of services such as:

  • debt management plans,
  • settlements,
  • mortgage loan review/modification, and
  • recommendations.

In the past, when a taxpayer filed for bankruptcy but they still needed to work in order to support their family or pay necessary household expenses they would file a form called a “Chapter 13 Plan.”

With a Chapter 13 Plan, the court would enter an order approving the plan, and the plan would specify monthly payments. 

These monthly payments were designed to cover all ordinary living expenses as well as any priority debts such as child support or alimony, taxes, and mortgages.

The IRS will only remove the lien against your house if you meet certain requirements that show that you need this relief and that your hardship will continue.

Those requirements include:

  1. Not being able to sell your house for at least two years, or the sale of the property does not provide enough funds to pay off all non-exempt debt.
  2. You cannot finance a new home within one year before filing and up to six months after filing for bankruptcy. This means that if you are planning on filing for bankruptcy, you should not sign a purchase contract without consulting with an attorney first.
  3. Not being able to get a loan secured by your equity in your house within one year before filing and up to six months after filing for bankruptcy.
  4. The IRS will remove the lien regardless if the amount of equity is greater than $600,000 or less than $100,000.

If you owe back child support and you file bankruptcy you may be able to file a form called “Form 8379: Injured Spouse Allocation.” 

The purpose of this form is to let the court know what part of your joint refund should go towards the arrears owed by your spouse when he or she owes more than they can pay.

The IRS will “reassess” your tax return if you filed it correctly, but they determined that you actually owe them additional money or that you are entitled to additional refundable credits.

The reason for this is because the math on the 1040 form didn’t quite add up. 

As an example, let’s say John owes $4,000 in federal taxes after his withholding and he claims the earned income credit worth $1,000. If John originally owed $3,000 then this would be correct.

However, if he originally owed $5,000 then he would need to complete a form called “Form 843: Claim for Refund & Request for Abat.”

What Does the IRS Consider a Permanent Disability?

The IRS considers a person disabled if they can provide medical proof that they cannot maintain employment due to their condition. For the purpose of the tax code, this means that you will be considered disabled if:

  1. You cannot do the substantial and material duties of our work because of your physical or mental condition; and
  2. Your disability has lasted or is expected to last for at least one year or will result in death.

*Important Note: This does not mean that you must file an application for SSDI provided you meet all requirements related to filing for bankruptcy with a qualified attorney experienced in both personal injury bankruptcy and Social Security Disability claims.*

Disability doesn’t only impact the individual who may suffer from such ailment but it can also have a negative financial effect on the person’s entire family. Disabled citizens who are unable to work due to their disability may face a greater risk of filing for bankruptcy because of medical debt and other credit-related issues that may arise from living expenses, such as:

  • Disciplinary Action Against Medical License
  • Disciplinary Action by State Board of Accountancy
  • Securities Violation

Debt Forgiveness in Bankruptcy

Those who owe federal taxes can take advantage of certain provisions within the IRS tax code that provide relief from that debt. In addition, those who become disabled or file for bankruptcy after suffering an illness or injury can benefit through Social Security Disability (SSDI) programs.

Can the IRS Take Your Social Security Check for Back Taxes?

Generally, they cannot. Depending on your age and disability situation you can file for bankruptcy or appeal IRS collection efforts to prevent the seizure of your SSDI checks.

However, the government recently announced changes to this program so it is important that you speak with an attorney about how this new legislation may affect your case.

How Can I Get Debt Forgiveness?

You can use Form 982 to reduce tax debts by including it in your Chapter 7 bankruptcy filing.

If you aren’t able to benefit from debt forgiveness through one of these methods then consult with a licensed attorney who specializes in filing personal injury bankruptcies, as well as Social Security Disability claims immediately.

Do You Get a Tax Break for Being Disabled?

While tax breaks are available the majority of disabled citizens do not qualify for them. 

To take advantage of this option you must be unable to work because of your disability, which means that unemployment benefits would be higher than what you could earn if you were working.

If You Were Segregated Into a Special Needs Trust Would You Still Be Eligible for SSDI?

In most cases, the answer is yes. The main thing to remember about a special needs trust is that it gives you more control over your finances and protects your assets so you don’t lose them once you begin receiving government benefits.

For example, if a person with a disability receives an inheritance shortly before they file for SSDI then they may lose all or part of the money through a disqualification.

How Can I Get Disability Without a Medical Exam?

If you feel that you are unable to maintain gainful employment due to a medical impairment then file an application for SSDI benefits as soon as possible.

Even if your disability is not severe enough to qualify you now it is important to lay a solid groundwork for the future.

In most cases you’ll have to complete a multi-step process that includes obtaining medical records from your doctor, completing an application, and undergoing an exam along with other requirements as determined by the Social Security Administration (SSA).

In addition, you will need to provide proof of your financial status including income and assets, and any work history.

Who Qualifies to Collect SSDI?

To qualify for benefits you must be unable to do “substantial gainful activity” due to a disability that has lasted or is expected to last at least one year or result in your death.

In general, the SSA defines this as earning less than $1,000 a month.

Is There a Disability Tax Credit in the United States?

No. The IRS does not waive taxes for disabled citizens due to their health status, because the amount you owe would be considered taxable income.

However, there are certain tax breaks that can offset or even eliminate your debt depending on your financial situation.


Since disability happens to so many people, including celebrities and politicians, it is important that you speak with an attorney about your case.

The best way to protect yourself from being victimized by the IRS or other governmental agencies is to hire a qualified professional who knows how to take full advantage of all legal tax breaks available in your state.

If you want to learn more about filing personal injury bankruptcy claims, speaking with a licensed attorney is the best option.

Your lawyer will be able to provide you with all of the information you need to successfully file for debt forgiveness, which can have a major impact on your life.

As far as how much money SSDI benefits are worth in the United States, it depends on your financial situation and the type of income you will use to pay your expenses.

In general, the SSA sets a limit on how much money an individual can make without affecting their benefits.

With that in mind, it is important that you file for SSDI right away so you can begin receiving government benefits while working with a disability attorney who can help you file for bankruptcy protection if necessary.

To learn more about how to protect your assets and get the benefits you deserve, including SSI benefits, contact a skilled attorney who can give you all of the crucial information you need before filing for disability.

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