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Gulf Residents Fear Claims Will Be Taxed

From a pleased to be humorous Associated Press:

Gulf Coast residents unsure if claims are taxed

By ALAN SAYRE (AP)

June 22, 2010

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.

What planet are these people from?

Many were already angry about how long the oil giant took to cut the checks.

Actually, BP seems to be paying people amazingly fact, all things considered.

Perhaps they should just pass out credit cards without even asking for IDs, like FEMA did post Katrina. (Where at least one third of the federal money doled out was stolen via fraud.)

So when they got the money — generally about a few thousand dollars each so far — they spent it fast…

Accountants have been trying to nail down the implications for thousands of taxpayers after President Barack Obama said BP would create a $20 billion disaster fund and provide another $100 million for oil workers who lose their jobs because of the six-month moratorium on deepwater drilling in the Gulf of Mexico…

Notice how accountants, lawyers and, of course, IRS agents never let a crisis go to waste, either.

Tax experts said generally all income is taxable under federal law unless specific exemptions are approved by Congress or the Treasury Department — and neither has acted yet on oil spill damage claims.

The IRS would not comment on whether exemptions would be made, citing a policy of not answering questions on specific tax issues.

Hilarious. They have this policy why? Because they don’t know their own tax policies, either?

Adding to the confusion, Kenneth Feinberg, who was chosen by President Barack Obama and BP to oversee the Independent Claims Facility, said Friday it hasn’t been determined if the payouts will be considered taxable income.

Mr. Feinberg seems to be confused about a lot of things. (He is probably waiting to hear back from his boss, Mr. Obama.)

Some tax experts said they expected federal action soon to clarify the situation for Gulf Coast residents and business owners.

"With the experience we’ve had with tornadoes and hurricanes, they know they need to address this," said John Ams, executive vice president of the Alexandria, Va.-based National Society of Accountants.

It’s not the first time the region has dealt with whether disaster money should be taxed.

And yet, once again, the federal government seems to have been caught completely unprepared. It’s almost as if there is a pattern there.

In the aftermath of Hurricane Katrina, Louisiana and Mississippi residents received federal money to rebuild their homes after many claimed a casualty loss for the damage on the 2005 tax returns.

The IRS initially required people who received the money and took the deduction to add the value of the deduction to their 2007 returns as taxable income. That decision angered many residents, including some who were pushed into a higher tax bracket as a result.

After residents and local leaders protested, Congress in 2008 voted to negate the IRS decision.

Remember when there was ‘equal protection under the law’? You can bet whatever federal money people received from Hurricane Andrew was taxed.

Why should some disaster relief be more equal than others? Is it ‘social justice’?

Without any such decision yet from federal authorities, tax experts are advising people getting BP payments to do a bit of advance planning and set aside some money…

That doesn’t sit well with Cherie Edwards, who is now only working one day a week at her job booking charter fishing trips at Zeke’s Landing in Orange Beach, Ala. The lost hours due to the oil spill are costing her about $270 week…

"I haven’t even thought about taxes. Wow. That makes me mad," said Edwards, who has one child in college and another in high school. "I’m already losing money, and now I’ve got to figure out how to hold back money to pay taxes?"

We suspect people are actually mad to find out just how much they are really paying in taxes. When you are given lump sum by the government, and then told they want a portion back for taxes, it’s pretty obvious how big a slice is being taken.

In our usual weekly paychecks taxes are effectively hidden by ‘withholding.’ They become all too invisible.

This article was posted by Steve on Tuesday, June 22nd, 2010. Comments are currently closed.

9 Responses to “Gulf Residents Fear Claims Will Be Taxed”

  1. Mithrandir says:

    HA! I am sure the federal government will enjoy playing with more tax money when it comes rolling back to them. That was the scam all along! Force BP to pay out $20 Billion, let some trickle down to the common folk so they will shut up, the the government will get a lot of the kick-back later on.

    Wasn’t it Cash for Clunkers or some of the housing tax breaks that was also taxable too? I can’t remember, but one of those scams benefited Mr. Taxman I remember.

  2. proreason says:

    “We suspect people are actually mad to find out just how much they are really paying in taxes. When you are given lump sum by the government, and then told they want a portion back for taxes, it’s pretty obvious how big a slice is being taken.”

    Bingo !

    And who really thinks the Moron gives a rat’s patootee about the people of the Gulf Coast…..except the noble black and hispanic people, of course.

    And and the supposedly independent Mr. Feinberg is certainly showing his true colors. I wonder is he can even go to the bathroom without asking permission from the criminals first.

    The idea that the Cabal is letting somebody else control their $20 billion slush fund is the yuk yuk of the year.

  3. Jim C says:

    Why is there any doubt? Of course it will be taxed. The people requesting the money work hard to make a living and run their own businesses. The federal government would be foolish to let this crisis go to waste.

  4. canary says:

    Well, it’s legal and most likely BP will base all payments with 0 deductions and the worker will wait til next year to get anymore back from the Obama’s IRS with 1000’s of new agents to run health care.

    They should look on the bright side. Not actually having to work for their income, will compensate somewhat.

  5. NoNeoCommies says:

    The unreported danger in this situation is that everyone will get enough money that they won’t really feel any pain.
    If they don’t feel any pain, why work hard to prevent a similar disaster?
    Who cares if horrible mistakes are made as long as the worst I experience is the torture of filling out a few forms?

    Making them whole means putting them where they were.
    They were paying taxes before, weren’t they?

    Heck!
    If I can get paid for not working and don’t have to pay taxes, I’m in it for life!
    Don’t plug that leak!

  6. Chuckk says:

    Aren’t taxes due on all income? Has something changed?

  7. LarryG says:

    Let’s say there weren’t any spill. Would their income be taxable? Give them their tax-free claim at a reduced rate. Free money? Please.

  8. confucius says:

    Follow-up from AP:

    IRS wants taxes from BP payments for lost wages

    by Stephen Ohlemacher
    June 25, 2010

    WASHINGTON – 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. …

    http://news.yahoo.com/s/ap/20100625/ap_on_bi_ge/us_gulf_oil_spill_taxes

    Does the IRS ever wonder why people hate them?

  9. Georgfelis says:

    Of course if these benefits are turned into untaxed income, then BP is going to get cornered by the IRS into NOT being able to deduct them as a legitimate business expense, therefore extracting the tax money from a company already villanized by the press, and sending it even farther along the path to bankrupcy to protect its few remaining assets from an unlimited wave of (US Government supported) lawsuits.

    Yeah, its hard to sympathize with BP.


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