The Small Business Times

Do Homeless People Pay Taxes?

Individuals in the US have to submit their tax returns every year, but do homeless people pay taxes too? You could be homeless without a permanent address but still employed. Does that mean you have to pay taxes and file a tax return each year?

Homeless people pay taxes if they earn any form of income. And many homeless people have jobs. They may just not earn enough to put a roof over their heads. On the other side of the coin, homeless people without an income are exempt from paying tax. However, if they meet specific requirements, they could qualify for financial assistance from the IRS.  

Taxes are mandatory contributions from individuals or corporations to the government. The Internal Revenue Service (IRS) is the department that collects taxes in the US. Like many other countries, the US government applies tax to taxpayers’ monies. For example, income from a salary, interest from additional income, or capital gains tax from an investment.

The aim of collecting taxes is to finance government activities like public services, government operations, Medicare, and Social Security.  Therefore, taxes are used by the government to construct roads, schools, hospitals, and other social amenities. 

Do Homeless People Pay Taxes?

Homeless people are those without a permanent address, usually experiencing severe financial difficulties. There are, essentially, two categories into which homeless people fall. And these categories dictate how tax affects them.

Unemployed Homeless People

Unemployed and homeless people don’t need to pay tax or file a tax return. In fact, anyone not earning an income does not have to pay taxes. However, it’s important to note that those who don’t earn an income may qualify for tax benefits. 

The Internal Revenue Service (IRS) has made financial assistance available to homeless and unemployed people. And during the Covid-19 pandemic, the IRS also initiated the Economic Impact Payments program to further assist homeless people. 

That said, the IRS cannot assist individuals who aren’t registered on their system. Therefore, unemployed, homeless people are encouraged to file a tax return each year to qualify for tax benefits. This way, the IRS will have your personal information on file and will be able to credit you accordingly each year.

Perhaps you’ve missed out on any COVID-19 related Economic Impact Payments to date. If so, you may still be able to obtain the money owed to you through a Recovery Rebate Credit. But, to get paid, the most important thing to do is to ensure that the IRS has all your information.

While the IRS will require you to provide an address, this does not mean that you need to have a permanent address. If you are homeless, you can use the address of a shelter or a friend when submitting your information. You’ll also need to supply them with your social security number.

Payments will be mailed to the address that you list. Therefore, you don’t need a bank account to receive the payments. 

Employed Homeless People

We know that unemployed, homeless people don’t pay taxes. But do employed, homeless people pay taxes to the US government? The answer is yes, but only if they earn over the income tax threshold.

The Urban Institute conducted a study of homeless adults living in a shelter. They found that 45% of the single adults and 38% of the adults with a family earn an income. This study shows that a large portion of homeless people is employed. However, they do not earn enough to provide shelter for themselves or their families.

Employed people making a low to moderate income have some advantages in paying taxes. The US has an Earned Income Tax Credit (EITC) program that gives a tax break to people earning a low income. To find out if you qualify for this program, it’s best to speak to an IRS agent.

That said, it should be mentioned that individuals have to meet specific qualifying criteria to obtain this credit. For instance, they must have been a resident in the United States for at least 6 months. And the amount you receive may vary if you have dependents or are disabled.

Conclusion

With the rise in homelessness due to the pandemic, many are curious whether homeless people pay taxes. And, as we’ve determined, the answer is yes and no. 

If the homeless person is employed and earns above the income tax threshold amount, they will pay taxes. However, they may benefit from the EITC program initiated by the government.

That said, if they earn less or nothing at all, they do not have to pay any taxes. But they may qualify for financial assistance if they register with the IRS.