IRS Quick Facts and Tips
Knowledge is bliss, and as a taxpayer having certain knowledge and information can be very handy. There are some benefits the IRS offers that are not so obvious. However, paying attention to the Internal Revenue Code reveals these benefits. This post will expose you to some facts and tips regarding common unknown issues.
- Payments Received from Reverse Mortgage are Non-taxable
Payments received from a reverse mortgage are non-taxable loan proceeds, not income. However, you must know that you can’t deduct the interest you have initially paid because you are not using those proceeds to buy, build or substantially improve a home securing the loan.
- Roth IRA Earnings are not Tax-free
The IRS has a 5-year clock on Roth IRAs. This means you must wait 5 years to take funds from the Roth IRA penalty-free. When you contribute to a Roth IRA, you cannot immediately withdraw the earnings tax-free, however, if you leave the fund in that Roth IRA for at least 5 years and you’re over 59 1/2, you can withdraw it tax-free.
You should note that this is limited to your earnings only. You can withdraw your contributions anytime tax-free. Similarly, you are subject to the 10% penalty tax on early withdrawals, unless you meet any of the qualified exceptions.
- Funds Contributed to Support Ukraine are Non-taxable
If you contributed from your paid leave to support Ukraine in its current crisis, the funds contributed are considered non-taxable to the employee. As for the business, the IRS considers the deduction as a charity or business expense.
- Term Life Insurance Policy is Saleable
It is not new to see people have life insurance that lapses because it is too expensive. If you’re one of the individuals that cannot continue making your term life insurance premium, consider selling your policy. You can sell your term life insurance policy to other individuals. To successfully do this, you must file the necessary documents, including 1099-LS, 1099-SB, and 1099-R.