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emc011075
emc011075, Tax adviser
Category: Tax
Satisfied Customers: 2856
Experience:  IRS licensed Enrolled Agent and tax instructor
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Please, give me the list of non-taxable damages by IRS. Example,

Customer Question

Please, give me the list of non-taxable damages by IRS.
Example, a claim for damages that is not taxable. I want the list please
Submitted: 1 year ago.
Category: Tax
Expert:  emc011075 replied 1 year ago.
Hi. My name is ***** ***** I will be happy to help you.
There's no such list. Damages are not taxable income. Are you talking about insurance reimbursements? It is not the damage that determine if the reimbursement is taxable or not, it is type of property that was damaged (personal or business), type of reimbursement and in some circumstances how the reimbursement is issued.
If you give me more details about your case I might be able to help you.
Customer: replied 1 year ago.
In case of personal damages. Example, if someone published false information with your name that damaged your name, whereby you cannot able to get a job for many years because of such false information published to the public and various organization used the false information to make decision against you which caused stressed for you, break up your marriage and children, cannot rent a car, cannot rent an apartment, be in a very stressful situation, but no physical injury. If settlement is made or payment is made as a result of publishing such false information can that payment be taxable?
Customer: replied 1 year ago.
Another thing I want to add to the above question is, if someone is attending school and as a result of such false information the person lost his or her job. Does such fall into the damages that is not taxable?
Customer: replied 1 year ago.
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Customer: replied 1 year ago.
What do you mean by service offer?
Expert:  emc011075 replied 1 year ago.
Again, there's no such thing as taxable damage. Damages from tax standpoint is a deduction, not income. There's a deduction called casualty and theft loses, but it only applies to an actual physical property that was damaged, destroyed or stolen. Unfortunately most settlements with exception for physical injuries are considered income. Settlement for publishing false information would fall into taxable category unless the part of the settlement would be specifically allocated for medically documented stress related injury or illness.
Here's how IRS defines/tax the settlements: http://www.irs.gov/pub/irs-pdf/p4345.pdf
I know that's not the answer you were hoping for but believe me, if there were an easier way to do it and still to comply with IRS complex rules I would be happy to tell you that.
The additional service offer is something the website does automatically, I didn't send it. You can ignore it. It is basically an offer to communicate beyond this chat room, like via e-mail, skype or phone call.
Expert:  emc011075 replied 1 year ago.
I see you read my respond but didn't get any feedback from you. Any questions? Is there anything else I can help you with today?
I see you offline now. So if this answered your question, please take a moment to rate my response so that I may receive credit for assisting you today. However, if you need clarification, or want to discuss this issue further, let me know. Thank you.
Customer: replied 1 year ago.
Please, what I'm looking for is that. IRS has what they called publication 252 taxable and nontaxable income.
Based on the example I gave above, does IRS have a list or what can be described as nontaxable income using the example above. I can give you time to check for the information for me please, I know IRS has so many places for the right information but being that I don't know how to search for this information that's why I want to give you time to check for the information please.
Expert:  emc011075 replied 1 year ago.
I can give a list of income that is generally non taxable but it will not include your specific situation because that's not how IRS operates.
Here's the list of income that is usually not taxed by IRS:
gifts and most inheritances
life insurance proceeds
child support
certain veteran’s benefits
dividends on veteran’s life insurance loans
insurance reimbursement of medical expenses not previously deducted
welfare payments
compensatory damages for personal physical injury or physical illness
workers’ compensation
some qualified pension distributions for Public Safety Officers
income from qualifying scholarships
As you can see, court settlements are not even listed. For tax purposes income and deductions are categorized by the type of income. Your's is categorized as settlement. The link I gave you before talk about how the settlements are taxed. IRS has it's own rules and supersedes any court settlement. If you want your settlement to be nontaxable you and your attorney have to structure/write it in certain way that will fit IRS nontaxable income definition. That's the only way IRS will accepted as such.
On page 30 of pub 525 read under "court awards and damages", it clearly states that you have to include settlements in your taxable income with exception for physical injuries. You will not find a reliable source that will list your type of settlement as nontaxable.

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