WASHINGTON (AP) _ The Internal Revenue Service wants its cut from oil spill victims who receive BP payments for lost wages.
Under current law, BP payments for lost wages are taxable _ just like the wages would have been, the IRS said in tax guidance issued Friday. Payments for physical injuries or property loss, however, are generally tax free. Payments for emotional distress? Taxable, though medical expenses related to the emotional distress are deductible.
BP officials have agreed to create a $20 billion fund for spill victims, as well as a $100 million fund to support displaced oil rig workers.
The IRS issued the guidance Friday to help spill victims sort through the law’s complexities. The agency has posted tax information for oil spill victims on its website and plans to hold forums in seven Gulf Coast cities on July 17 to help victims with tax troubles or questions.
“As residents of the region cope with the evolving situation, I want to assure them that the IRS will be doing everything it can to provide tax help to those who need it,” IRS Commissioner Doug Shulman said. “We encourage anyone who has an issue with the IRS to contact us and explain their hardship, and we will work with them to find a solution.”
“We’ll do everything we can under current law to help taxpayers,” Shulman added.
The IRS has a number of programs to help people who make a good-faith effort but cannot afford to pay their tax bills. Agents can postpone collections in certain hardship cases or allow delinquent taxpayers to skip installment payments if they have made timely payments in the past.
The IRS will hold its July 17 forums for oil victims in these cities: Mobile, Ala.; Panama City, Fla.; Pensacola, Fla.; New Orleans; Houma, La.; Baton Rouge, La.; and Gulfport, Miss.
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