Elders can amend tax returns on pension payments back to 2016

By Dean Rhodes

Smoke Signals editor

The good news is that Tribal Elders can go back and amend their tax returns from 2016 through 2019 to recoup any taxes they paid on their Elders’ pension payments.

The bad news is that the deadline for one of those years – 2016 – is April 15.

According to Karen Case, a Willamina-based licensed tax consultant designated by the Tribe to prepare Tribal member tax returns, the federal Tribal General Welfare Exclusion Act of 2014 provides that gross income does not include the value of any Indian general welfare benefit that adheres to a set of guidelines: available to any Tribal member who meets the guidelines, for the promotion of the general welfare, not lavish and extravagant, and not a compensation for services.

Payments, such as Elders’ pensions, qualify; per capita does not.

Case said Tribal Elders who paid taxes on their pension payments in 2016, 2017, 2018 or 2019 must file a 1040-X form with the Internal Revenue Service. The approaching April 15 deadline only affects the 2016 tax year.

According to www.irs.gov, taxpayers must file a 1040-X form within three years after the date they filed their original return to claim a refund.

Tribal member Del Bolden wrote a letter to Tribal Council regarding the issue on Friday, April 3, as well as contacted Smoke Signals about the approaching deadline.

“In previous years, the Tribe has sent out a 1099 form for members to file tax returns,” he wrote. “In those 1099 forms, Elder welfare payments were lumped with per capita payments. If Tribal members can in fact file a 1040-X and are eligible for a refund, the Tribe needs to provide members with documentation for previous years (2016 through 2019) in the form of a 1099 or equivalent that lists Elder welfare payments separately from per capita payments (since they are now treated as different types of income by the IRS).

“I realize the COVID-19 pandemic has necessitated downsizing and limiting interaction within the Tribal government. However, I would urge the Tribal Council to notify affected members as soon as possible so they can at least file a 1040-X prior to the fast approaching due date. Further, there will be a need to make available to Elders who received Tribal payment benefits in prior years a corrected 1099 or similar acceptable document. The new document should show non-taxable and taxable income separately.”

Bolden said that he examined bank statements from 2016, which separated per capita payments from the Elders pension payments, to file his amended tax return.

Case said she is currently working on four or five Tribal Elder tax return amendment cases in an effort to meet the April 15 deadline for 2016 returns. She advised other Tribal Elders to contact their tax return preparer to file an amendment.

Should Tribal Elders miss the deadline to amend their 2016 tax returns, they still have time to amend their next three years’ worth of returns. Case said she heard that doing so recouped one Elder almost $3,600, which far outweighed any additional tax preparer cost to file the amendment.

Finance Officer Chris Leno said the Tribe has not discussed issuing new 1099s for amended returns, but it is likely not feasible to meet the April 15 timeline at this point because of the current pandemic situation and the fact that nothing has been budgeted. However, he added, starting in 2021 the 1099s issued by the Tribe will not include Elders pensions.

In December, Tribal Council adopted a new General Welfare Ordinance that makes benefits under the Elders’ and SSI programs available on a tax-free basis.

Leno said that previous instruction from the Internal Revenue Service about whether Elders’ pensions were non-taxable was inconclusive and only recently did the Grand Ronde Tribe find out that other Tribes were considering it so.

Case can be contacted at 971-237-1230 or angelbookkeepingllc@gmail.com.

For more information, go to www.irs.gov and search for “Tribal General Welfare Guidance.” If you submit an amended 1040-X, you must write Tribal General Welfare Exclusion Act on top of the form and mail it to Internal Revenue Service, 1973 N. Rulon White Blvd., M/S 7700, Attn. GECU, Ogden, Utah 84201.