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Poor IRS: Types of Income Even They Cannot
Tax
There are actually a surprising number of different types of
income that cannot be taxed by the Internal Revenue Service.
Nontaxable income is the income that a person receives that
does not need to be reported to the IRS. Some people may not
know what income is and is not taxable when it comes to the
IRS, so it can be very beneficial for people to learn since
this will save them time and possibly money when it comes to
filing their taxes. It is still important to keep records of
this income, especially if a person is audited. They will need
to show proof that their income is legitimate and nontaxable
and this is typically not very difficult to do. All an
individual needs to do is prove that the income that falls
under one of the categories listed below, or under the category
of a similar nontaxable item, and the IRS can do nothing to get
at that money.
Some of the most popular types of income that can not be taxed
include child support payments and welfare benefits that an
individual or family may be entitled to. However, what many
people may not know is that there are a number of other options
that a person has for income that is nontaxable. These include
but are not limited to income that is received by an individual
due to the death of another person, proceeds from accident
insurance or health insurance companies, and this also goes on
to include insurance contracts for individuals who are in need
of long term care, as well as some specific pieces of property
that an individual may have received as a gift from another
person or as an inheritance from a person who has either given
them the possession while they were still alive or as an
inheritance from a person in a last will and
testament.
The IRS also considers any money that is received by an
individual under the Department of Veteran's Affairs
nontaxable, and this includes any benefits from the Department.
Worker's compensations packages that a person man have received
due to an injury or a long standing sickness that occurred
while the person was on site at their job would also be
nontaxable. Certain Education IRAs and Roth IRA allotments to
individuals are also not to be taxed by the IRS, but it is
important to look into those divisions for the specifics when
it comes to what instances require taxes to be paid on them and
which instances do not require to have taxes paid. This is also
true for certain situations in which money is withdrawn from a
Medical Savings Account in order to be used to pay for medical
care and other medical expenses. Some dependent care assistance
programs will also allow a certain percentage of what is paid
through their program to be nontaxable.
After September 10, 2001, all survivors to those who where in
the armed forces that were deceased after this date do not have
to pay any taxes on their death gratuity benefits. And for all
tax years and seasons after the year 2002, dependent care paid
by military Dependent Care Assistance Programs was nontaxable
for military members. These are just some of the ways in which
individuals can save money, since there are nontaxable income
items. People do not need to include this income on their tax
filings for years that coincide with any of these events
happening to them. This works out nicely for the individuals
since they will be able to keep all of the allotments and not
have to worry about giving any of the money to the government
in the form of taxes.
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