As if the residents of the Gulf Coast haven’t had it hard enough, the IRS is moving in to make sure they get their cut of any payouts from BP. These government bureaucrats even have the chutzpah to pretend that their actions are benevolent and beneficial on the grounds that they are helping taxpayers understand the regulations they must comply with. Of course, it’s Congress and the bureaucratic tax collection industry that have conspired to create such a tangled mess of regulations in the first place.
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.
…The IRS issued the guidance Friday to help spill victims sort through the law’s complexities. The agency has posted tax information for oil spill victims on its website and plans to hold forums in seven Gulf Coast cities on July 17 to help victims with tax troubles or questions.
If we had a simple flat tax, these residents would be able to spend less time trying to understand and comply with a 70,000+ page tax code, and more time doing important things like figuring out how they’re going to make a living now that their beaches are covered in oil.
