Tax disputes

The Prairie State Legal Services Tax Clinic assists low income individuals who have a tax dispute with the IRS, and provide education and outreach to individuals who speak English as a second language (ESL). While we don’t prepare taxes, we can help with issues involving IRS action or debt. Most commonly clients come to us after they have received a notice from the IRS alerting them to some kind of tax liability, or when the IRS starts taking collection action such as garnishing wages or placing a lien on a property.

Contact the Clinic hotline at 1-855-TAX-PSLS (1-855-829-7725) or apply online to see if you are eligible. We check the hotline mailbox throughout the week, so please leave a clear and detailed message with your name, phone number, and best time to return your phone call.

Tax Disputes The Clinic Resolves

The Clinic handles a wide variety of tax disputes. We may be able to: 

  • Exams/Audits – Resolve IRS claims about your income, deductions, or credits
  • Tax Debts – Reduce or eliminate taxes, and get money paid to the IRS refunded to you
  • Collections – Stop the IRS from taking your Social Security payments, wages, or money from your bank account
  • Litigation – Represent you in the United States Tax Court and U.S. Federal Court
  • Innocent Spouse Relief –  Obtain relief from a joint tax debt caused by your current spouse or former spouse. 
  • Identity Theft – Help when someone steals your identity or your dependent’s identity for tax purposes
  • Missing Economic Stimulus Payments – Help obtaining your missing EIP payments

The Clinic does not generally provide tax return preparation services.  Exceptions include filing past-due tax returns necessary for us to help you: 

  • file an offer in compromise (OIC) to settle your tax debts; and 
  • apply for an installment agreement (IA) to pay off your taxes under a payment plan.

Why You Should Contact The Tax Clinic?

Resolving tax issues can be challenging for the average person. IRS letters can be confusing, and important deadlines can affect your case resolution options. The opportunity to schedule certain important hearings may be lost if you do not comply with IRS deadlines.  The experienced tax professionals in the Tax Clinic will help you sort these complicated tax matters and help you resolve your issue.

You May Have A Tax Issue And Not Know It

The U.S. Tax Code affects many people’s lives on a day-to-day basis. You may have potential issues with the IRS and not realize it. For example:

  • Earned Income Tax Credit (EITC) – The EITC is a credit for working individuals and families. The credit can be worth over $6,660, and it is claimed on your income tax return. The IRS estimates that up to 20 percent of those who qualify for the EITC never claim it on their tax return.
  • Do I Need to File a Tax Return for a Prior Year? – If you are legally required to file a tax return and fail to do so, the IRS may file a return on your behalf. If that happens, the taxes can be higher than if you filed yourself, because the IRS will not include all of the deductions and credits that you may be eligible to receive.
  • Collections – The IRS has broad collection powers, including taking money from your bank account, taking your Social Security benefits, garnishing your wages, and filing federal tax liens. However, the IRS has only 10 years from the date of the assessment to collect a tax debt (with some exceptions). After 10 years, the debt will go away automatically. This 10 year period will not start unless you file a tax return or if the IRS files a return on your behalf. Failing to file or filing late delays the start of the 10 year collection period, which is why it is important to file on time even if you are unable to pay your taxes.
  • Identity Thieves Can Take Your Refund – If someone has your personal information such as your Social Security number, they could use your identity to file a return and claim a refund. If you think this has happened, you should call the Clinic to protect your identity and recover your tax refund.
  • After a Divorce, Who Gets to Claim the Children? – Claiming dependents may be confusing for divorced parents who share custody. Often, parents are mis-informed as to the rules for claiming children after a divorce or separation. If an ex-spouse incorrectly claims your child, you should contact the Clinic for help.
  • Tax Issues in Domestic Violence – When you file a joint return, both parties are liable for the tax debt stated on the return, and for any omissions not listed on the return, even if you leave your spouse or divorce. These issues frequently arise in domestic violence cases, and in many cases, the abused spouse may be able to eliminate the debt by requesting Innocent Spouse Relief.
  • When a Lender Cancels Some or All of a Debt you Owe – If a lender forgives all or some of your debt, such as a car loan or credit card, it will be considered taxable income, unless an exclusion applies. This commonly arises with cancelled credit card debt, car repossessions, and foreclosure or short sales. For many low- to moderate-income taxpayers, the debt can be excluded because the taxpayer is insolvent.

Tax Implications of Settlements In or Out of Court – Settlement money you receive from a lawsuit or a legal claim is likely taxable income and must be reported on your tax return. You should consider this before reaching your settlement terms.

 

How To Qualify For Services

Individuals living in our 36-county service area may qualify for no cost advice or representation in federal income tax matters. In many cases, you will not have to travel to the Clinic, and we can help by phone, email, or mail.

Generally, clients can have income up to 250% of the Federal Poverty Level (FPL) – see table below. With certain exceptions, the amount in dispute with the IRS for each tax year may not be more than $50,000.

2021 Federal Poverty Level – Illinois

Size of Household

250% FPL

1

$32,200

2

$43,550

3

$54,900

4

$66,250

5

$77,600

6

$88,950

7

$100,300

8

$111,650

For each additional member of the household in excess of 8, add:

$11,350

     

     

    FILE YOUR TAXES NOW TO GET MONTHLY CASH PAYMENTS TO SUPPORT YOUR CHILDREN 

    Even if you don’t normally file!

    What’s the Expanded Child Tax Credit?

    To help people get through the COVID -19 pandemic, the American Rescue Plan massively expanded the Child Tax Credit (CTC). It will give most families $3,000 to $3,600 per child, even if the families have little or no income.

    In 2021, families can get:

    $3,600 ($300/mo) per child for children ages 0 to 5

    $3,000 ($250/mo) per child for children ages 6 to 17

     

    IRS should start paying these benefits monthly in July 2021.

    Most families will get:

    250 to $300 a month per child from July through December 2021. Families will get the remaining $1,500 to 1,800 per child when they file their 2021 taxes in Spring 2022.

    The Child Tax Credit will not affect your Medicaid, SNAP/Food Stamps, TANF Cash Assistance, SSI or other public benefits.

    Is My Child Eligible?

    To be eligible, children must:

    – Have a Social Security Number

    – Live with you for at least half of the year

    – Be under age 18 as of December 31, 2021

    Children are eligible if they are your children, adopted children, stepchildren, half-siblings, foster children, grandchildren, nieces or nephews, or certain other relatives.

    The adult filing taxes must have a Social Security Number or an Individual Taxpayer Identification Number.

     

    You do not need to have any earnings to get this credit. Families will qualify for a full credit if their income is below $75,000 for single filers, $ 112,000 for people filing as head of household, or $150,000 for people who are married and filing jointly.

     

    How Do I Get It?

    File taxes! The deadline is May 17, 2021

    File Now:

    If you did not file taxes in 2019 or 2020

    – Even if you do not usually file

    Even if you do not have earnings

     

    Want to read more? Check out this FAQ about the CTC at https://www.taxpayeradvocate.irs.gov/news/tas-tax-tips-early-information-about-advanced-child-tax-credit-payments-under-the-american-rescue-plan-act/