Prisoners are required to file a federal income tax return according to the same criteria as those not in prison. If in doubt as to whether a particular incarcerated individual needs to file, refer to IRS Publication 501.
A prisoner may receive compensation based on services performed either in a correctional industry (e.g., license plate manufacturing) or work release assignments, and should be issued a Form W-2 or Form 1099-NEC as appropriate.
One important difference between prisoners and non-prisoners is that employee income received for work performed while an inmate in a penal institution, in a work release program, or in a halfway house must be deducted from earned income for the purpose of calculating the Earned Income Credit.
After entering a prisoner's income into the tax return, you must indicate how much of their earned income relates to their work as a prisoner.
To enter prison earned income reported on Form W-2 in TaxSlayer Pro, from the Main Menu of the tax return (Form 1040) select:
- Income
- Wages, Salaries, Tips (W-2)
- Other button
- Select Taxpayer's Prisoner Earned Income or Spouse's Prisoner Earned Income.
To enter prison earned income reported on all other source documents in TaxSlayer Pro, from the Main Menu of the tax return (Form 1040) select:
- Income
- Other Income (W-2, 2555)
- Wages Earned While Incarcerated - Enter Taxpayer or Spouse earned income
Note: This is an article on entering prisoner income in the TaxSlayer Pro program. This is not intended as tax advice.
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