The Internal Revenue Service may take a bite out of that $20 billion Gulf spill fund.
And locals are fuming.
Many residents were already surprised that BP took so long to dish out payments. So when they got their compensation -- a few thousand dollars each -- they spent it quickly.
“"If they're going to pay you a lump sum, like for a year, then bam, take the taxes out of the check," said Todd Pellegal, an unemployed Gulf Coast shrimper from Boothville, La. "But a little bit at a time, they shouldn't."
Pellegal said he immediately spent his $2,500 check buying groceries for his family and paying off bills.
President Barack Obama created a $20 billion disaster relief fund last week to compensate victims who have lost their livelihood after placing a six-month ban on deepwater drilling in the region
The April 20 oil rig explosion of Deepwater Horizon killed 11 workers and resulted in the worst oil spill in U.S. history.
The IRS would not comment on whether an exception would be made. And Kenneth Feinberg, who is overseeing the handouts, said he hasn’t determined if the funds would be taxed.
But tax experts said all income can be taxed under federal law unless specific exceptions are made by the Treasury Department or Congress.
"With the experience we've had with tornadoes and hurricanes, they know they need to address this," said John Ams, executive vice president of the Alexandria, Va.-based National Society of Accountants.
Cherie Edwards, who books charter fishing trips in Orange Beach, Ala., is not thrilled that she may have to pay additional taxes. She’s already losing $270 a week.
"I haven't even thought about taxes. Wow. That makes me mad," said Edwards, who has one child in high school and another in college. "I'm already losing money, and now I've got to figure out how to hold back money to pay taxes?"
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