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Victims of the recent Gulf oil spill are eligible for help from the IRS. The IRS announced that they would be providing individuals and businesses affected by the Gulf oil spill assistance with tax help. There will also be a Gulf Coast Assistance Day on July 17th.

Some of the guidance refers to dealing with how taxpayers should treat compensation payments from BP. BP payments for lost income are taxable according to current law in the same way that wages would be. Compensation for physical injuries or property loss are non-taxable.

The IRS bulletin has more information regarding the different types of tax assistance that are available:

WASHINGTON –– The Internal Revenue Service today provided guidance to individuals and businesses affected by the oil spill in the Gulf of Mexico and announced a number of new efforts to help affected taxpayers, including a special Gulf Coast Assistance Day on July 17.

“This is a very difficult time for many people affected by the oil spill in the Gulf of Mexico. As residents of the region cope with the evolving situation, I want to assure them that the IRS will be doing everything it can to provide tax help to those who need it,” IRS Commissioner Doug Shulman said. “We encourage anyone who has an issue with the IRS to contact us and explain their hardship, and we will work with them to find a solution. We’ll do everything we can under current law to help taxpayers.”

Here is more information about which types of payments are considered taxable:

The guidance released today is based on current law, and it explains how recipients of payments from BP should treat the payments for tax purposes. According to the current law, BP payments for lost income are taxable in the same way that the wages or business income these payments are replacing would have been. The law treats compensation for lost wages or income differently for tax purposes than compensation for physical injuries or property loss, which generally are nontaxable.

Every person can have unique financial circumstances, so the IRS encourages taxpayers to review their tax situation or talk with their tax preparers about the implications of payments or compensation from the oil spill.

The new information is available in a question-and-answer format on a special section of the IRS website, IRS.gov. The IRS is closely monitoring the situation in the Gulf, and additional information will be added to IRS.gov as it becomes available.

The IRS will be holding a special assistance day on July 17th. They are also offering a toll-free hotline soon and other types of assistance for victims of the oil spill:

To help people in the Gulf Coast area dealing with tax issues, the IRS also announced a special assistance day on July 17 in seven cities. Taxpayers and tax preparers will be able to work directly with IRS employees to resolve tax issues, including specific topics related to the oil spill. The IRS will hold the Gulf Coast Assistance Day in four states:

* Alabama: Mobile.
* Florida: Panama City and Pensacola.
* Louisiana: New Orleans, Houma and Baton Rouge.
* Mississippi: Gulfport.

Times and specific locations will soon be announced and will be available on IRS.gov.

In addition, taxpayers with problems related to the Gulf spill will soon be able to reach IRS personnel through an IRS toll-free telephone line. Specially trained IRS personnel will be available to help people with tax questions related to the oil spill. More information will be available soon about this telephone line.

The IRS encourages taxpayers in the Gulf struggling with payment or collection issues to contact the agency. The IRS continues to have a number of ways to help taxpayers dealing with oil spill issues or other economic hardship issues, including:

* Assistance of the Taxpayer Advocate Service for those taxpayers experiencing particular hardship navigating the IRS.
* Postponement of collection actions in certain hardship cases.
* Added flexibility for missed payments on installment agreements and offers in compromise for previously compliant individuals having difficulty paying.
* IRS employees will be permitted to consider a taxpayer’s current income and potential for future income when negotiating an offer in compromise.
* Accelerated levy releases for taxpayers facing economic hardship.

The IRS announced today that they would be extending the deadline for defined contribution retirement plan sponsors that were affected by flooding, storms, or other natural disasters in several states. The IRS is extending the deadline to July 30, 2010 and the normal deadline was April 30, 2010 for those who qualify. The IRS briefing explains how qualification for the extended deadline works in more detail:

WASHINGTON — The Internal Revenue Service is providing administrative relief for sponsors of defined contribution plans, such as section 401(k) plans, that were affected by the storms and other severe weather in those counties in Alabama, Connecticut, Massachusetts, Mississippi, New Jersey, Rhode Island, Tennessee and West Virginia declared Presidential Disaster Areas during the period from March 1 through May 31, 2010.

Notice 2010-48 administratively extends to July 30, 2010, the April 30 deadline for restating affected pre-approved defined contribution plans and, if applicable, for submitting determination letters to the IRS, to July 30, 2010. The section 401(b) remedial amendment period for these retirement plans is also extended to July 30.
The relief provided by this notice is in addition to the statutory relief already provided by the IRS, under section 7508A of the Internal Revenue Code, to taxpayers affected by the federally declared disasters in these eight states during the period from March through May 2010.

The notice details the scope of the relief provided by this administrative action and further defines the conditions under which a plan qualifies as an affected plan. A plan is an “affected plan” only if any of the following locations relating to the plan were in the federally declared disaster areas at the time of the disasters:

1. The principal place of business of the employer that maintains the plan;
2. The principal place of business of the employer that employs more than 50 percent of the active participants covered by the plan;
3. The office of the plan or the plan administrator;
4. The office of the primary record keeper serving the plan; or
5. The office of any advisor that had been retained by the plan or the employer at the time of the storms or other severe weather that is directly involved with the adoption of the plan or the submission of a determination letter application to the IRS.

In addition, the IRS gave information on what types of disasters qualify for the administrative relief:

This relief applies to the following disaster situations:

Connecticut victims of March 2010 severe storms and flooding. See, News Release CT-2010-35, June 1, 2010.

Tennessee victims of April-May 2010 severe storms and flooding. See, News Release AL/TN-2010-56T, May 5, 2010.

Alabama victims of April 2010 severe storms and flooding. See, News Release AL/TN-2010-55A, May 4, 2010.

Mississippi victims of April 2010 severe storms, tornadoes and flooding. See, News Release LA/MS-2010-21, April 30, 2010.

New Jersey victims of March 2010 storms and flooding. See, News Release NJ-2010-32, April 5, 2010.

Massachusetts victims of March storms and flooding. See, News Release MA-2010-15, March 31, 2010.

Rhode Island victims of March storms and flooding. See, News Release RI-2010-11, March 31, 2010.

West Virginia victims of March storms and flooding. See, News Release WVA-2010-12, March 31, 2010.