How To Minimize the Taxes on your BP Claims Check

Those who have filed and received a claims payment from BP or GCCF for damages suffered as a cause of the Deepwater Horizon oil rig accident and spill are likely going to have to make sure Uncle Sam gets his share.

BP Claims Payments are Considered Income

Claims payments are considered income by the Internal Revenue Service, and as such, taxable just like any other paycheck, lottery win, or unemployment compensation. The IRS always gets their cut anytime money changes hands. For those along the Gulf Coast not accustomed to even having to file a tax return, this is going to come as quite a slap in the face.

FEMA Check where not Taxable Why Are GCCF Checks?

Many along the Gulf Coast received checks from FEMA after the Hurricane Katrina disaster. Those checks were not taxable, yet these are. What is the difference? In a nutshell, the checks being shelled out to the Deepwater Horizon victims are to replace lost income, lost means of income, and damage to businesses that once provided you with income.

It is essentially giving you the paycheck you should have had anyway, if the oil spill had not have occurred. Since that income was going to be taxable, so these claims should be taxable. The money that came from FEMA after Katrina was money to provide victims with the very essentials of life, such as a roof over their head, toiletries, medicines, and food. Those FEMA payments were not necessarily an income replacement, but rather a life replacement, if that makes any sense.

Minimize Your BP claim Check Taxes

How, then, can you minimize the damage about to be done to your income by the IRS? Well, first off, make sure you file. If you received more than around $9,000 either from your paychecks or from your BP settlement, then you need to file a tax return.

Once the Gulf Coast Claims Facility (GCCF) cuts you a claims check, they report it to the IRS anyway, so it is not like they will just forget about you. Go ahead and file and don’t risk a chance that the IRS comes after you with interest and penalties or even jail time for not filing a tax return.

Who knows – you might even end up getting some money back. Keep in mind that any damages you suffered from the Deepwater Horizon accident and spill can be deducted from what you might owe the IRS.

Any losses your business suffered can be deducted as well. Anything you paid out for cleaning up after the accident can be subtracted from what you might owe. It is a good idea to get with an accountant or a certified financial planner or a tax professional like H&R Block to make sure you do everything the right way.

As I said before, you may end up even getting more back than you would have if you had not filed. Do not be scared to file just because you do not have the money either. Even if you are flat broke and owe the IRS, they are usually very good about working with people, especially victims of accidents like this, and arranging terms that are agreeable to everyone.

BP Claim Money and Taxes

So we all know that taxes are never going away and we all have to pay them on our income and company profits. But what if that income is coming in the form of a BP claims check?

Well it will not at this writing change anything to your income taxes, as the money has to be claimed as income on your tax return. Now there is some cases where the money does not have to be claimed as income. Here is a list of taxable bp claim checks and non taxable BP payments.

Taxable BP Claims Payments

*Lost Wages (personal)

*Lost income (business)

*Compensation for emotional distress (personal)

Not Taxable BP Claims Payment

*physical injury

*property loss

* lost property value

As my last post was talking about the BP final claims payment its important to remember that if you get a big settlement check from BP that taxes are due on the money that your receive from them. If you where to use an oil spill attorney for the job the amount you pay them can be deducted from your final net payment that you will receive from BP and that you have to pay taxes on.

Its very important to me and I cannot stress this enough, do not settle for less than what your claim is worth. When it comes to the final payment and you give up your right to go after BP again for more money make sure its enough money to get your though the next few years. Who knows how long the effect on this oil spill will last.