A taxpayer received civil damages, restitution, or other monetary awards related to wrongful incarceration. Are there any exclusions for such income?
Congress added the "Wrongful Incarceration Exclusion" in the Protecting Americans from Tax Hikes Act of 2015 (PATH Act). Under the Wrongful Incarceration Exclusion, a wrongfully incarcerated individual who meets certain requirements does not include in income any civil damages, restitution, or other monetary awards received that relate to incarceration for the covered offense for which he or she was convicted.
Eligible taxpayers may be able to file an amended return to claim this exemption. The wrongfully incarcerated individual must file the claim for refund within:
- three years from the date the income tax return was filed that previously reported the award, or
- two years from the date the individual paid the tax on the award, whichever is later.
If filing an amended return to claim this exemption, write "Incarceration Exclusion PATH Act" on the top of the printed form 1040-X. For details on amending a return in Drake Tax, see Related Links below.
For more information about this exclusion, see the IRS updates to Wrongful Incarceration FAQs.
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