IRS expands outreach to Gulf oil spill victims

The IRS has expanded its outreach to taxpayers affected by the Gulf oil spill. Taxpayers may request suspension of collection activities and other relief, the agency announced. The IRS has created a hotline to answer taxpayer questions.

Taxpayer assistance

The IRS indicated it will assist oil spill victims by suspending collection and examination actions. However, assistance is not automatic. Taxpayers must request it by contacting the IRS at the new Gulf oil spill hotline: (866) 562-5227. IRS representatives will be available weekdays from 7 a.m. to 10 p.m. local time, the agency reported.

Lost income

The IRS previously explained that any payments that an individual taxpayer receives for lost wages, lost business income or lost profits must be included in income. Self-employed individuals who receive a payment that represents compensation for lost income of the individual's trade or business should include the amount of the payment in net earnings from self-employment for purposes of the self-employment tax.

The IRS further explained that payments to an individual to compensate for lost wages are not wages for purposes of Social Security and Medicare tax. These payments will also generally not be subject to income tax withholding, unless backup withholding applies.

Congressional action

Congress may also act to help victims of the Gulf spill. A bipartisan group of senators recently introduced legislation that would, among other things, provide for a five-year carryback of losses related to the oil spill and incurred by a commercial or charter fishing, or tourism-related, business in the oil spill recovery zone and penalty free withdrawals from retirement savings accounts. The proposal would also allow employers hiring new employees in the oil spill recovery zone to qualify for the Work Opportunity Tax Credit (WOTC).

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