IRS May Tax Payments to Gulf Coast Victims

Great, the spill still goes on, the drilling has ceased, so many folks down their in the gulf region are without work, now that the Gov't will be sorting out the claims, should we be surprised that the IRS peeks their nose into this?

The vultures are circling...

www.foxnews.com

NEW ORLEANS — Out-of-work Gulf Coast shrimper Todd Pellegal spent his first $2,500 check from BP quickly, paying off bills and buying groceries for his family.

He never even considered putting some of it away for taxes.

Now he's among the people up and down the Gulf Coast reeling from the oil spill disaster who are surprised — and frustrated — to find out the Internal Revenue Service may take a chunk of the payments BP PLC is providing to help them stay afloat.

Congress or the Treasury department can authorize exemptions, let's see if they step up to the plate...

Everyone else has to pay tax on their income, even people who get SSDI. What I'm afraid of and perhaps you are too, is that many will NOT get near what they have lost and still have to pay.
Watching the lawyer commercials is sickening and I hate to see them feeding off the miseries of others but this case is no different from say a car wreck. We ALL have to keep feeding the monster - it's HUNGRY

The IRS sneaking through wallets looking for money is like Pedo Bear creeping through threads looking for CP.

They both look harmless on the surface, but once you find out what they are really about you realize just how insidious they are.

I'm no lover of the IRS by any means.

This is replacing lost wages. Those were taxed wages. This should be taxed also.

You better believe that BP is keeping track of every cent and turning that info over to the appropriate government agencies.

This is just another example of what is wrong with America in that people have turned into a life of greed expecting everything free.

Taxing wages is fair but I also think that the Government needs to be very attentive to making sure that these people are being paid the correct amount. I watched something on Youtube a few days ago where a fisherman was interviewed and he said that BP is paying an average of the last three years as compensation and that this wasn't a realistic amount as post-Katrina incomes were far below normal.

Ha. Of course they might. It wouldn't be American if they didn't. They tax and double everything else from unemployment to retirement savings, so why not?! We need to money in the tax coffers considering fewer and fewer people are working and more and more corporations are shirking. Someone's got to shore up the tax base.

They may have no choice but to pay tax on that. After August 20, 1996 a legal settlement or court award received is only tax free if on account of physical injury or physical sickness. Obviously those payments aren't a court award, and I'm not sure it could be considered a legal settlement because nothing has been settled, legally. And I don't think those monies are designated for a physical injury or sickness award.

[edit on 22-6-2010 by Divinorumus]

Workers Comp. wages are not taxed. I don't think these should be either.
STH

Its a shame that the funds provided from the $20B cant be distributed as quickly as the the tax authorities are attempting to get hold of it.

2,500$ payout? Seems to me it would be the better thing to just make a payout based on an averge of several years wages.

If a guy were making 100k on his shrimp boat last year looks like that would be the figure. What the # is 2,500?

Lets say a seaside resort made 1mill last year and are now going to be shut down for a few years. What? Are they going to drop that guy a chck for 25K? See yous in court. I am glad for you to see me I sure are.

Originally posted by Bravo111
Its a shame that the funds provided from the $20B cant be distributed as quickly as the the tax authorities are attempting to get hold of it.

It is going to be a very good watch to see how this 20b gets passed out.

I have already heard that BP is going to write off all of this money being paid out in claims to the victims of their gulf disaster.

A few questions,

Is BP compensating these victims equal to their lost wages / business? If so, is it pre tax pay or take home pay?

If the IRS intends to tax these claims, are they gong to be fair about it, since a Presidential appointee is now entrusted to grant the payments, why can they not just take their cut as the checks are handed out?

If the IRS intends to tax these claims, wouldn't it be better if they do so going forward and not backdate the taxes to those who have already received claim monies?

I just fear that those folks who are already being impacted financially, will end up in worse shape than they already are should the IRS step in and demand their cut of the cash.

If their payments include their "full pay", then I support the taxing...why should they get special treatment?

However, having worked in the insurance industry, I know that lost wage claims are ALWAYS reduced to the "net income", as there was no work done, thus no SS/FICA to be paid.

So, if the IRS attempts to tax net income payments, then I believe they will fail miserably in attempting to do so. They may succeed at first, but would certainly be overturned by the SCOTUS.

reply to post by JacKatMtn


JackatMtn they are suppose to be taxes just like the do with unemployment benefits and regular wages.

I don't see why this should not be done as long as the money is been given.

The first mistake many people make is to think that taxing wages is at all fair. It is YOUR sweat equity, your labor, for what reason should it be taxed? Un-apportioned, direct tax on sweat equity is the most absurd tax imaginable.

Keep in mind that the main reason for the voluntary income tax is to stem inflation (no, not roads, not schools, the INCOME TAX goes to none of that, it simply goes back to balance books..)

The job of the IRS is to stem inflation and attempt to balance books, by reducing the money supply in the populace as much as possible.

With all that said, of course the IRS will come after these people. If they don't like it, then they should learn who they really are, and stop acting as the Person tied to the corporate de-facto US who unwittingly took a unilateral oath @ birth.

Thats a good thing and it should be done.

Think of what it will do to the US ( will happen anyway) when you have a large portion of the population that is no longer paying any taxes because they cant work. Combine that with the shortage we already have because of high unemployment and you can see we are in trouble.

I don't see a problem with this. When they do their taxes next year...they have to report this as income just like everyone else.

I don't see this as the evil IRS looking to get money...but more as a "fair is fair"...I feel bad for them...but all jobs have risks...they should be thankful for what they are gettting and not worry about having to pay taxes on it like everyone else.

I think BP should be paying the tax if they are going to try to pull this. Say, maybe, BP should set up another totally separate fund to pay for the tax to be levied on the payouts.

If a group of people were to win a $20b lottery, they would be taxed about 40%, right? That leaves the pool down to $12b. Not as nice as 20 billion dollars, though.

Thats not the point, though. These are victims of a horrendous disaster. I don't know for sure, but anyone know if disaster relief checks are taxed? Also, this sounds more like a draw than full compensation. If it were 100% compensation, then that seems kind of reasonable to pay taxes if BP is in it for the long haul, but I seriously doubt that any more compensation will be in the works. This just smacks of a token gesture to me.

You know, our legislators seem pretty good at drafting messed up laws that can take effect immediately, plus executive orders, that if they want to rake BP over the coals, they have every opportunity in the world to do so. Sure its just a pipe dream, but its possible.

I just think that the tax liability should be waived until we know the extent of the disaster. In the best case scenario, gulf residents can continue their lives at home, lest we have mass exodus north and exacerbate an already poor job market. Remember, none of these people affected got together and decided to ruin their livelihoods and investments by drilling the most dangerous well ever attempted by man.

I agree that the parties involved, and the legislators who can do something about it need to step up. Keep the IRS and greedy lawyers out of it. Everyone wants to make a buck off this it seems, but the money should be reserved for the folks whose lives could be forever changed because of this.

reply to post by dfens

No...it's a tax write off for them. So, see, someone has to pay the taxes.

Originally posted by ~Lucidity
reply to post by dfens

 

No...it's a tax write off for them. So, see, someone has to pay the taxes.

I know. It really sucks that you are right, thats why I hope someone will step up to protect these people affected.

I'm also sure that the only taxes that BP pays to US are what their American workers and shareholders pay. Tax havens are for the mega rich, not for the majority of honest, hardworking folks.

I just wonder if by virtue of the patriot act, we could classify them terrorists, freeze and seize all assets til this whole thing is played out. I know that is a stretch and pretty naive, but what if?