By Charles Infinger, Enrolled Agent
On June 25, 2010, the Internal Revenue Service announced a number of new efforts to help taxpayers affected by the Gulf Oil Spill, including a special Gulf Coast Assistance Day on July 17.
The guidance released today is based on current law, and it explains how payments from BP should be treated for tax purposes. According to the current law, BP payments for lost income are taxable in the same way that the wages or business income these payments are replacing would have been. Compensation for physical injuries are non-taxable and payments for property losses are non-taxable as long as they do not exceed the adjusted cost basis of the property they are replacing.
To help people in the Gulf Coast area dealing with tax issues, the IRS also announced a special assistance day on July 17 in seven cities. Taxpayers and tax preparers will be able to work directly with IRS employees to resolve tax issues, including specific topics related to the oil spill. The IRS will hold the Gulf Coast Assistance Day in four states:
* Alabama: Mobile.
* Florida: Panama City and Pensacola.
* Louisiana: New Orleans, Houma and Baton Rouge.
* Mississippi: Gulfport.
Times and specific locations will soon be announced and will be available on IRS.gov. In addition, the IRS will soon be establishing a special toll-free number to assist taxpayers with tax questions relating to the oil spill.
The IRS encourages taxpayers in the Gulf struggling with payment or collection issues to contact the agency. The IRS offers a number of ways to assist taxpayers dealing with oil spill issues or other economic hardship issues, including:
* Assistance of the Taxpayer Advocate Service
* Postponement of collection actions in certain hardship cases.
* Added flexibility for missed payments on installment agreements and offers in compromise for previously compliant individuals having difficulty paying.
* The ability for IRS employees to consider a taxpayer’s current income and potential for future income when negotiating an offer in compromise.
* Accelerated levy releases for taxpayers facing economic hardship.