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Shrimper in Grand Isle, LA (Michael Whitney/Firedoglake)
Just when you thought the people of Louisiana couldn’t possibly take another shot to the face, there’s another one coming. It turns out that people who received claim money from BP could see that money taxed at the highest possible rate because the BP oil disaster wasn’t officially declared a disaster.
CPA Ted Stacey said, “If you were paid for lost wages or income, that’s going to be ordinary income that is taxed at the highest rate you pay. It could be as high as 35 percent for federal or 5 percent state.” [...]
However, for those who have already spent their BP money, Stacey said, “This may be the time to seek professional help.”
And for those who are thinking of getting away with not declaring their BP claims, Stacey said he is strongly advising against it.
“If BP paid you money for missing wages, income, etc., they are likely going to send a notice to the IRS about it,” Stacey said.
For so many people in Louisiana, the oil disaster ??? killed their livelihoods, eliminating the only source of income on which so many people relied. Frequently, when I was in Louisiana in May at the height of the spill, I heard from people who never declared much, if any income. A good portion of the economy was in bartering or otherwise under the table. Now, after getting some relief from BP, the government could tax it at 35%.*
Any thoughts on how we can stop this from happening?
*UPDATE: Not all claims will be taxed at 35%; that is just the highest marginal rate, and I doubt very many fisherman qualify at that level. Still, it appears that claim money will be deducted as regular income and not exempt.
Want the kicker though? BP could deduct the money it paid out in claims from its taxes.
35 Comments
Maybe a Tea Party alliance, no taxes on BP claim payouts. It’s visceral, and it’s tax-related, they should enthusiastic about putting a stop to it.
I think that’s wrong. Under 26 USC 139 One can exclude from income payments for necessary living expenses or payments from federal agencies, but these are claims to compensate for lost income paid out by BP. It seems that regardless of whether a disaster was declared (are we sure one wasn’t?), claim payouts are taxable income.
It seems Obama did declare it a disaster, BTW.
This is from IRS Publication 17:
So, again, lost income claims paid by BP won’t be excluded from income regardless of whether a disaster is declared.
The Gulf of Mexico is Dying
A Special Report on the BP Gulf Oil Spill
http://globalresearch.ca/index.php?context=va&aid=22514
Then, showing their true colors right on their sleeves:
Darrell Issa asks business: Tell me what to change
http://www.politico.com/news/stories/0111/46995.html#ixzz1A4wl9YbL
Where is that at? What publication are you looking at?
These people need to fill our a section C file and deduct every possible thing they can and amortize the rest.
Yep. Issa is about to get hiself wrapped up in a mess.
Wow. A quick googling seems to show that there actually wasn’t a federal disaster declaration, but that several governors declared state disasters. Not sure about La. – didn’t come up in google list (first pages).
The one “bright” spot I can see is that folks who usually have little declared income are probably in a lower income bracket than 35%.
Still, I wonder if a disaster declaration couldn’t be made even at this date. OTOH, of course, if it’s something to benefit “the little people,” then it ain’t a high priority for anybody in Congress or the WH.
JP12, where and what publication are you referring to as “26 USC 139″?
I know Jindal got on the tubes alot and yelled, but I have no real source to say the WH declared disaster.
Yes, you are right. If the business is a big corporation there would be all sorts of protections and tax breaks.
http://www.taxalmanac.org/index.php/Sec._139
Found it. This doesn’t seem to help.
“the BP oil disaster wasn’t officially declared a disaster.”
Say what?
“If BP paid you money for missing wages, income, etc., they are likely going to send a notice to the IRS about it,”
About a 100% chance of that, I’m guessing.
I would suggest they all get together and find a good tax attorney to help them.
Google it. IRS code.
http://vlex.com/vid/sec-disaster-relief-payments-19210805
TRUE! They will send the IRS an 8 ft tall manuscript of business loses to write off!
“Any thoughts on how we can stop this from happening?”
Gather up some reasonable estimates of the damage – current and future – and compare those estimates against other US disasters that were, ya know, declared actual “disasters.”
Try to argue with that, Mr. Jagoff Politician and Mr. Jagoff Oil Executive.
Rethinking that, Shoto. British Pertroleum is not beholden to the US, IRS.
Excellent idea!
I haven’t gone back now to look it up on the toobz, but I don’t recall obama declaring a disaster. Had he done so it would have alienated his buddies at bp. In fact, I recall how obama downplayed the problems, and indicated that everything was going well. obama seemed to indicate that pointing out how badly things were going was almost unpatriotic and, anyway, the government tried to prevent scientists from looking too closely at the disaster.
“Frequently, when I was in Louisiana in May at the height of the spill, I heard from people who never declared much, if any income. A good portion of the economy was in bartering or otherwise under the table.”
BP is making it harder for them to cheat on their taxes?
That’s my recollection, as well. Admit fully I have no links and have not researched it. But I remember a lot of us here at FDL were mightily annoyed at how Obama consistently downplayed the whole event and *pretended* that it was “no big deal,” whilst sucking up to BP. My personal guess is that Obama never declared this a disaster…. and some clever tax lawyer probably pointed out long ago that Team IRS could then gouge the proles for tax dollahs from their paltry BP payouts. After all, the LA folks aren’t the wealthy elites, so why should *they* get a tax cut??? Tax cuts are ONLY for the super wealthy, doncha know?
People paying “as high as 35%” are making more than $373,650.00.
Didn’t obama go golfing with someone from bp during the gushing from the hole?
Oh wait..since when did you guys begin to believe that ones money was his personal property. Wow..this flies in the face of the basic tennets of progressives..that one does not own anything, but that it is the Governments first, and then the Govt. gets to redistribute as it sees fit?????????? So, your belief system would dictate that the Govt. tax it at the highest rate because it is UNEARNED INCOME..then the govt can re-distribute it back to the spill victims as it sees fit???
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As usual, the “little people” pay through the nose, while for the rich, why, their hard-stolen…er EARNED cash is their god-given property!
– You know the score, pal. If you’re not cop, you’re “little people.”
(Just substitute “rich” for “cop” and you have it…)
I’m going to take a flyer here and predict that precisely no-one is going to pay 35% tax on a single solitary red cent of the BP payouts.
First, the payouts replace income that the victims would have otherwise received from their normal course of business. Therefore, their total taxable income is unlikely in the extreme to be higher than in a normal year. Some of them may find it harder to cheat on their taxes because BP reported all the payouts; I have minimal sympathy for those people.
Second, the threshhold for the 35% marginal rate is nearly $400k net income. For wage earners, that’s just their wages, but for small businesspeople, that’s profit. Someone making $400k of profit from their small business is probably able to weather a disaster like this with ease, whether or not they get a payout.
Third, you have to make a truly ungodly pile of money for your total tax rate to approach 35%. If you’re married with kids and working on a W2, it’s quite possible to make six figures and pay less than 15% total.
Agree.
I think the buried lead here is:
“CPA Ted Stacey said,“
The tax accountant wants you to be very afraid and contact his office for advice.
Am I the only one that doesn’t feel badly that if people had a barter/undeclared income that let them dodge the taxes that the rest of us pay, that they end up paying taxes?
Just because Wall Street/corporate america doesn’t pay taxes doesn’t mean we can all go underground.
ditto
Spot on – I was going to note that this is just an uniformed person looking for a problem in areas outside their expertise – weird how we on the left are so easily distracted from the real problem of the class war of the rich and corporate on the middle class – and this time by a pretend problem – “declare a disaster”.
Sad.
I do believe we have a winner.
Doesn’t the shrimper have a name?
Nope. Not much sympathy for tax dodgers here.