3.3.4.5 Federal Income Tax Refunds

The agency must disregard as an asset the entire amount of any federal tax refund for a period of 12 months from the date of receipt. The federal tax refund is considered disregarded income in the month received. (See 3.2.8.1 )

If a case is failing for exceeding the countable asset limit, the W-2 agency must ask the individual if they have received a federal tax return in the previous 12 months.

The W-2 agency must take the following steps if the individual reports a federal tax return:

Subtract the federal tax return amount from the amount of the individual’s existing countable assets, enter the corrected amount into CWW, and run eligibility;

Enter a case comment explaining the adjustment to countable assets;

Verify the tax return amount (see 4.1.3 ); and

Scan any relevant documents into ECF.

If the W-2 agency subtracts the federal tax refund from multiple countable assets, W-2 agencies must specify in case comments the amount of the federal tax refund that was disregarded from each countable asset.

E XAMPLE 1 - APPLICANT

On April 2, 2011 Jackie applies for W-2. She provides a bank statement indicating she has a checking account with a $3,000 balance.

The FEP must take the following actions:

Enter the $3,000 checking account into CWW;

Complete the driver flow; and

Run eligibility.

The CWW Eligibility Run Results page indicates that Jackie failed W-2 eligibility with a 024 reason code (countable assets are over program limits). Because Jackie failed W-2 eligibility for exceeding the asset limit, the FEP must ask Jackie if she received any state or federal income tax refunds in the past 12 months. Jackie tells the FEP that in February she received both a $1,000 state income tax refund and a $2,000 federal income tax refund, but she doesn’t have verification with her.

The FEP must take the following actions:

Subtract the $2000 federal tax refund from the CWW checking account entry;

Change the verification for the asset Type and Asset Amount to ? – NOT YET VERIFIED;

Request Jackie to provide verification of her federal tax refund amount, and the date she received it;

Enter a case comment indicating the amount and reason for the subtraction; and

Run eligibility.

Note : the FEP does not need to take any action on the state refund because Jackie received it two months ago and state EITC payments are only disregarded as income and assets the month they are received.

Jackie returns the following week with verification that she received a $2,000 federal tax refund on February 15.

The FEP must take the following actions:

Change the verification for the Asset Type and Asset Amount to indicate the type of verification Jackie provided; and

Run eligibility.

E XAMPLE 2 - ONGOING CASE

On April 10, Laticia calls to report she just received a $1,000 federal income tax refund and a $430 state income tax refund. The state income tax refund is the result of the state EITC. Both the full federal income tax refund and the state income tax return that is the result of the EITC are disregarded as income in the month received.

The FEP must take the following actions:

Enter a case comment in CWW identifying: The amount of the tax refunds, The dates Laticia received them; and Information on why the tax refunds were disregarded.

Follow the appropriate income tax disregard policy if Laticia fails W-2 eligibility for exceeding the asset limit in subsequent months.