ABLE accounts are tax-advantaged savings and investment accounts for eligible people with disabilities. An ABLE account can help the account owner save and pay for qualified disability expenses which enhance their health, independence and quality of life, without affecting eligibility for government assistance programs. Tax season is the perfect time to learn about ABLE accounts and taxes.
The 2022 tax season began January 24, 2022 when the IRS began accepting and processing 2021 tax year returns; the deadline to file is April 18, 2022 for most taxpayers unless an extension was requested. (Taxpayers in Maine or Massachusetts have until April 19, 2022 to file due to the Patriots’ Day holiday in those states.) ABLE account owners are not required to file income taxes simply because they have an ABLE account. A person may need to file taxes if they have employment income, SSDI, retirement income, investment earnings, or dividends. ABLE account owners, who are employed and those who are not employed may be eligible for tax deductions or credits which could result in an income tax refund. All account owners are encouraged to file their 2021 tax return electronically to claim tax credits or deductions which may result in a refund which may be saved. An income tax refund may be directly deposited and saved in an ABLE account without impacting public benefits.
federal tax credits which may Help You Save More
When you claim federal tax credits and deductions on a tax return, you can change the amount of tax you may owe. Deductions can reduce your countable income before you calculate the tax you owe. Credits can reduce the amount of tax you owe or increase your tax refund, and some credits may give you a refund, even if you don’t owe any tax. For Example:
Advance Child Tax Credit payments
Eligible families who did not receive any advance Child Tax Credit payments can claim the full amount of the Child Tax Credit on their 2021 federal tax return, filed in 2022. This includes families who don’t normally need to file a tax return.
People will need to know the total amount of advance payments they received in 2021 to compare them with the full amount of the Child Tax Credit that they can properly claim when they file their 2021 tax return. People who received the advance payments can access their online account to check the total amount of their payments. The IRS is also sending Letter 6419 to provide the total amount of advance Child Tax Credit payments received in 2021. Eligible families who did not get monthly advance payments in 2021 can still get a lump-sum payment by claiming the Child Tax Credit when they file a 2021 federal income tax return this year. This includes families who don’t normally need to file a return.
Earned Income Tax Credit
An employed ABLE account owner with low to moderate income -with or without children- may be eligible to claim the Earned Income Tax Credit (EITC) if certain qualifying rules apply to them. Claiming the EITC may mean a maximum credit of up to $6,728 in tax year 2021. You may use the Earned Income Tax Credit Assistant (IRS.gov/ EITCAssistant) to determine if you are eligible for the earned income credit (EITC). An EITC refund may be saved in the ABLE account.
Recovery Rebate Credit / Economic Impact Payments
Individuals who didn’t qualify for a third Economic Impact Payment or who got less than the full amount may be eligible to claim the Recovery Rebate Credit. They will need to know the total amount of their third Economic Impact Payments received to calculate their correct 2021 Recovery Rebate Credit amount when they file their 2021 tax return. Beginning in late January, the IRS will send Letter 6475 with the total amount of the third Economic Impact Payment received. People can also view their economic impact payments using their Online Account.
Retirement Savings Contributions Credit (Savers Credit)
An ABLE account owner may be able to claim a savers tax credit for making eligible contributions to an ABLE account. Depending upon the adjusted gross income reported on Form 1040, the amount of the credit is 50%, 20% or 10% of contributions. The maximum contribution amount that may qualify for the credit is $2,000 ($4,000 if married filing jointly) making the maximum credit $1,000 (or $2,000 if married filing jointly). The credit may result in a refund which may be saved in the ABLE account.
tax time tools
Individuals with disabilities who need accessibility can call 833-690-0598 for answers to tax-related products and services available in alternative media formats (for example, braille, large print, audio, etc.).
Interactive Tax Assistant
The Interactive Tax Assistant answers general tax law questions, including helping to determine if a type of income is taxable or if someone is eligible to claim certain credits and deductions. With changes to income and other life events for many, in 2021, tax credits and deductions can mean more money in a taxpayer’s pocket. This tool can help the ABLE account owner or tax preparer maximize all credits and deductions they may be eligible to receive.
Taxpayers can use their Online Account to securely see important information when preparing to file their tax return or following up on balances or notices. Taxpayers can view the amount they owe, make and track payments and view payment plan details. They can also access information about Economic Impact Payments and advance Child Tax Credit payments needed to file a complete and accurate return.
Where’s My Refund?
Taxpayers can check the status of their refund using the Where’s My Refund? tool. The status is available within 24 hours after the IRS accepts their e-filed tax return or up to four weeks after they mailed a paper return. The Where’s My Refund? tool updates once every 24 hours. All or a portion of a refund may be contributed to an ABLE account up to contribution limits for the account owner.
Direct deposit for tax refunds
Direct deposit gives taxpayers access to their refund faster than a paper check. Individuals can use a bank account, prepaid debit card or mobile app to use direct deposit and will need to provide routing and account numbers. ABLE account owners may choose to deposit a portion of their refund into their your ABLE account and another account too, by using Form 8888.
tax filing help
People are encouraged to use a trusted tax professional or to use tax preparation software to guide them through the process. Planning ahead can help you file an accurate return and avoid processing delays that can slow a tax refund. Free tax preparation services are available virtually: call 211 (311 for NYC) to find the closest free tax preparation site.
Free Tax Return preparation site
The IRS Volunteer Income Tax Assistance (VITA) and the Tax Counseling for the Elderly (TCE) programs offer free tax help and e-file for taxpayers who qualify.
IRS Free File
The IRS Free File program, available only through IRS.gov or the IRS2Go app, offers brand-name tax preparation software for those who earned $73,000 or less in 2021 or Free File Fillable Forms regardless of income. The software does all the work of finding deductions, credits and exemptions. Some of the Free File offers may include a free state tax return.
Members of the military and qualifying veterans can use MilTax, a Department of Defense program that offers qualified veterans free online tax preparation and e-filing software for federal returns and up to three state returns.
Links to online tools, publications, and other helpful resources are available on the IRS.gov/getready page. For more information about planning ahead, see Publication 5348, Get Ready to File and Publication 5349, Year-Round Tax Planning is for Everyone
Choosing a preparer
The IRS has several options for finding a tax preparer. The IRS provides an online database to help taxpayers locate an authorized e-file provider in their area who can electronically file their tax return. Choosing a Tax Professional provides information for selecting a tax professional. The Directory of Federal Tax Return Preparers with Credentials and Select Qualifications can help taxpayers find preparers in their area who currently hold professional credentials recognized by the IRS.
ABLE National Resource Center TAX Resources
- ABLE To Work Act
- IRS ABLE Final Regulations
- ABLE NRC Sample Disability Certification
- ABLE NRC Webinar Archive: Tax Time Tips 2022
IRS: Resources for People With Disabilities
The Internal Revenue Service is committed to providing tax information to people with disabilities and their families. Detailed information on the tax deductions, income exclusions and credits discussed above, along with others which may be helpful, are referred to below:
- Child and Dependent Care Expenses (Publication 503)
- Credit for the Elderly or Disabled
- Earned Income Tax Credit
- Disability and Earned Income Tax Credit (EITC)
- Medical and Dental Expenses
- Recovery Rebate Credit
- Retirement Savings Contributions / Savers Credit
- Household Employer’s Tax Guide
- Self Employed IRS Tax Center
- Small Business, Self-Employed Family Caregivers and Self-Employment Tax
- Tax Highlights for People with Disabilities
- Business Tax Credits for Owners or Operators of a Business
- Tax Withholding Calculator