Skip to comments.IRS May Tax Payments to Gulf Coast Victims
Posted on 06/22/2010 11:02:05 AM PDT by Nachum
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.
(Excerpt) Read more at foxnews.com ...
The list, ping
Mr. Pellegal it is income!
The IRS would fight buzzards to pick at the last remaining flesh on the bones of a dead taxpayer.
They tax your Unemployment too, what made them thing they would get this handout with no strings attached?
It sux, but I would have immediately asked about the taxes on that.
Known as: Insult to Injury courtesy of Hussein 0bama.
If they are getting paid for lost wages or income, why wouldn’t it be taxable?
If they are getting paid for damages like they would if collecting on a law suit, why wouldn’t it be taxable when other law suits are taxable?
If they are getting paid for personal injury, then no it should not be taxable.
I knew for sure they’d do that. Obama want’s all that BP Money set aside, rest assured it will all go to government cleanup workers (aka democrats without real jobs) and a taudry amount will go to joe shrimp packs of which most will be taxes. Obama gets to ban oil drilling and get paid for, and let the environment be destroyed by refusing help from other countries thus ensuring a new frothing at the mouth group of activists to campaign for Cap and Trade, it’s PERFECT !!
is tax money gained from IRS....... INCOME?... that can be taxed?...
Obama really cares. meh. what is new? Americans better get off their hind ends and drum the commies out of DC.
Amendment the 16th: “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived...”
Let's see...BP makes these payments. IRS takes a cut from the recipient...hmmm, kinda sounds like a shakedown to me!
“The government do take a bite, don’t she?”
No, its neutral. BP income goes down by amount of the payment. Recipient's income goes up by amount of payment. A wash in net income.
So let me get this straight, the Govt shakes down BP for money to get to the residents.
BP takes the money, which it will right off against income and profits and send it to the escrow account run by Feinberg to disburse to people.
The people who get it get taxed on income, pay sales taxes when they pay for stuff, etc.
Do you people realize what a mafia racket the Govt is yet?
The Govt makes the mob like like choir boys.
This entire thing is a scam only liberals could love.
So in the end the govt is going to get about 25% of all the BP money.
I wonder how much of the Gulf fishing industry was cash (unreported or taxed) business. Do workers idled by the spill have to produce W2s to validate their claims of lost wages?
Maybe PetroBas can hire them. I am pretty certain if they want to drill in the Gulf, the Obama Administration wouldn’t have a problem with it.
You've borken the code. Destroy red-states, destroy an oil company, create new precedents for seizing power and make 5 billion in the process. What more could a man-child want.
Fishermen.....not drill workers.
BP should pay the taxes on it. But, that being said, the IRS has the reputation of kicking people when they are down. Keep the people broke and you have control of them.
After all, he probably didn’t pay taxes on his former income....
“Did the guy think he was going to get a total free ride”?
...as a matter of fact, yes! This does seem to help bite the kenyan in the ass as the bad guy since most Americans think on the same terms as the shrimper.
“BP should pay the taxes on it”
We have defined a new stuck-on-stupid syndrome
“BPDS” = (BP Derangement Syndrome)
IRS rules for court settlements state that money received in compensation for missing wages is subject to income tax. This is not new. Current $20B fund is to compensate for lost wages. It’s not a court settlement, so there is room to argue in tax court . . .but . . . me guesses . . . the IRS wins.
The states will get their share too. States with an income tax will include the BP amounts when computing income subject to tax. Nothing new . . . this has been true for a long time.
If they were working their income should be taxed. I suspect a lot of them get paid in cash normally and the tax thing doesnt happen.
Unless they apply for a waiver.....=.=
I disagree, we shouldnt be giving the govt any of this money. The people need the help the most, not the disgusting govt.
Way to go Chavez, oops I mean Obama!
Actually, a case can be made that the Fed Gov is taking it on the chin. Without the payments, BP's income would have been higher by 20 billion. BP's tax rate would be about 35%. If the profits were distributed to shareholders as planned, the Feds cut would be another 15%. The feds would have gotten a combined 45% effective tax.
Instead the funds are being distributed to folks getting taxed anywhere from 0 to 35%. This results in a net loss to the Fed's of about 10-45% depending on the tax bracket of the folks getting the money.
I should have included 1099s, but you got my drift.
Or their tax returns showed vastly understated income due to the cash nature of their business. They probably took all their business deductions, showed just enough income to cover it. Which would make it hard to prove they are losing money by not working. They have kind of screwed themselves up in this deal. IMHO.
gee free money where do we get that? If the cost of clean up includes the coast guard who pays for that? What these folks need to do is go to BP with their tax return for last year and tell them I am losing ____ because I can’t fish - get all of it up front and then move the booms to clean up the spill. Maybe next year will be a good fishing year.
Compensation “to make you whole” is not taxed.
Sure it is, especially when you are being compensated for lost income that would have been taxable. You are no worse off paying a tax on a wage earned than on paying a tax on the same amount being paid to you because you did not earn a wage.
Income is taxed, thus compensation for lack of income is taxed.
Compensation for a loss or damage of something you have (say the oil screwed up his boat and BP paid to have it fixed), or for pain and suffering, is not taxed.
IT is INCOME!
This is income in place of your not being able to pursue your normal work.
Anyone thinking this is not INCOME is just plain stupid.
They all want replacement money for that which they lost, but it is definately taxable.
“A wash in net income.”
But not a wash in net taxes. Given the corporate tax rate is 35% and that most affected workers likely are in a 15% tax bracket, even when SS taxes are added on top, the net haul by the tax man actually will be lower. Of course, if the $20B comes out of profits that had been beyond the reach of Uncle Sam, then any taxes collected will be pure gravy.
That's called tax evasion. Subject to criminal prosecution.
I don't believe that is exclusively the case. It should also compensate for lost rent (condo owners) and lost revenue (small business owners).
“Current $20B fund is to compensate for lost wages.”
Agreed, but it sort of depends on how the amount of compensation was determined. To make a worker “whole” technically only requires replacement of after-tax income rather than gross income. So if I’m making payments from a limited fund, my incentive is to pay the lowest amount that would make the individual whole. The purpose of the fund is to assist workers, not help bankroll Obama’s profligate spending.
The point is, if the worker only got an amount to cover after-tax lost wages, he has a legitimate beef about having to pay taxes on this, especially if the situation was not explained to him.
In the future, these folks need to put aside, from their checks, the equivalent of what was withheld from their paychecks, from a similar amount in the past, or a portion of what they paid in previous years for their taxes.
The issue is the same. If the payments are determined to be replacing other income that would have been earned, the income is reportable on the appropriate form . . . same as the original income would have been.
Will this 20 billion be put into an account that will draw intrest?
“The purpose of the fund is to assist workers, not help bankroll Obamas profligate spending.”
I’m not sure you can leap to that conclusion. I wouldn’t/don’t.