October 13 – State Tax Refunds
Question: How are state income tax refunds, particularly state earned income tax credits, treated for SSI income and resource purposes? If refundable credits such as the earned income tax credit result in a refund greater than all taxes withheld from a worker’s pay, would the excess refund count as unearned income? Would any amount still held by the individual count as a resource the following calendar month?
Answer: The President recently released his Fiscal Year 2017 budget proposal and under his proposal, he calls for changes encompassing taxes and on expanding the Earned Income Tax Credit (EITC) including the exclusion of State EITCs. However, until any changes are implemented, we will need to follow the guidelines in POMS.
The POMS provide that any amount refunded on income taxes have already paid do not count as income for SSI purposes-this includes Federal and State income tax refunds. SSI counts an individual’s gross earned income when it is received. For this reason, an SSI recipient’s check has already been adjusted for the earnings.
State EITCs and other State refundable tax credits received in excess of income taxes paid are treated as income and resources if retained.
Additionally excluded effective, on or after January 1, 2010, is the portion of a Federal tax refund that is attributable to a Federal refundable and advance tax credit received. Earned Income Tax Credits (EITC) and advanced tax credits are also excluded regardless of the tax year involved under this law.
The American Taxpayer Relief Act of 2012 signed by the President on January 2, 2013, exempts us from counting all Federal tax refunds and advanced tax credits from resource counting for 12 months after the month of receipt. Under current policy, any amount of the tax refund remaining at the end of the 12-month period counts as a resource.
Would you like to find out more about WIPA and your benefits? Contact your statewide WIPA Program-Project 20/20 if you have questions like our Daily Tips or want to learn more about working while receiving social security disability benefits. Call our North Augusta office at 803-279-9611 or the Ticket to Work Helpline at 1-866-968-7842. You can also complete a Contact Us or Self-referral Form.