(GULF SHORES, Ala.) – People were warned, but not everyone listened and some couldn’t afford to. BP payments for lost income because of the oil spill are taxable in the same way wages are. Now it’s time to pay the piper.
For a lot of people the money has already been spent.
“They put the money back and here they are now the process of payments the interim thing has slowed down so they had to dip into that and pay their bills and everything else,” Johnny McElroy, owner of a surf shop in Gulf Shores said. “So it’s unfortunate but it’s going to be a life lesson for a lot of folks.”
McElroy knew what to do right away. his advice to others.
“I said look guys you got to put 35 percent back I know if you do the math its 33 percent, but I say go ahead and put that 35 percent in a savings account don’t touch it because the government you got to pay your taxes,” McElroy said. “That’s the way it is.”
Many people didn’t take that advice.
“There were lots of additional people coming to the lot that we weren’t expecting,” Mark Morgan with Southern Chevrolet said.
He says entire claims checks quickly became instant down payments.
“We had some folks obviously with some larger checks directly related to the fishing business or something like that,” Morgan said. “That did come with cash and buy trucks and cars we had some of that happen too.”
“Equipment expenses deductions, you know they can make contributions to pension plans or IRA accounts,” CPA Bert Sanders said.
Good advice for small businesses looking to lower their tax burden, Sanders has helped dozens in 2010 along the Gulf Coast, but what about individuals, the waiter, the fisherman?
“Our advice to most of those people first of all file your tax return on time even if you cant pay,” Burden said. The IRS offers installment plans and there are extra fees, but it’ll keep you in good standing with the IRS.
“we warned them about the tax consequences,” Gulf Coast Claims Czar Kenneth Feinberg said. “Now we thought about withholding but we felt its was inappropriate for us to do that. Each claimant has the right to do what he or she has to do.”
With the final payments program beginning, some people may be using checks from BP to pay the taxes on their previous payments.
The sight of oil may be gone, but it’s total impact is still unknown. Local businesses wonder whether demand will allow for prices to return to levels before the spill.
The IRS says it will be flexible with certain hardship cases by considering a taxpayer’s current income and potential for future income.
See video here: http://www.local15tv.com/news/local/story/Oil-Spill-Claims-are-Taxable/dtMzUtCVXUyGHQfYrHxlPw.cspx?rss=217
