Tax Guidance Released for Gulf Oil Spill Victims

The IRS has provided tax guidance for individuals and businesses affected by the oil spill in the Gulf of Mexico. The Service will also host a Gulf Coast Assistance Day on July 17 to help people in the Gulf Coast area with tax issues.

“This is a very difficult time for many people affected by the oil spill in the Gulf of Mexico,” IRS Commissioner Doug Shulman said in a statement. “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.”

The recently released guidance explains how recipients of payments from BP should treat the payments for tax purposes. According to the IRS, “BP payments for lost income are taxable in the same way that the wages or business income these payments are replacing would have been.” Typically, only compensation for lost wages because of physical injuries or property loss is nontaxable.

To help people dealing with these tax issues, the IRS will host a special assistance day on July 17 when taxpayers and tax preparers will be able to work directly with IRS employees to resolve tax issues related to the oil spill. The Assistance Days will be held in Mobile, Ala.; Panama City and Pensacola, Fla.; New Orleans; Houma and Baton Rouge, La.; and Gulfport, Miss. Times and locations will be available on IRS.gov.

Additionally, the IRS is encouraging taxpayers struggling with payment or collection issues due to the oil spill to contact the Service.