The IRS's new Gulf Oil Spill Information Center on their website has finally shed some light on tax treatment for oil spill victims. Those who receive BP payments for income lost will be required to pay money on these payments come tax time.
Although compensation paid for physical injuries or property loss caused by the oil spill is listed as nontaxable, it's still a blow to some that income to replace wages will be taxed by the IRS.
For gulf residents who have questions about how the IRS will handle payments from BP, the agency also announced that it will launch a hotline and hold a Gulf Coast Assistance Day on July 17 in seven cities: Mobile in Alabama; Panama City and Pensacola in Florida; New Orleans, Houma, Baton Rouge in Louisiana; and Gulfport, Miss.
“This is a very difficult time for many people affected by the oil spill in the Gulf of Mexico. 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 in a statement.