Form W-2, Wages and Tax Statement, reports the employee's earned income for the year. Employers should issue Form W-2 to every employee by January 31 and send a copy to the Social Security Administration. Employees may need to pick up Form W-2 from their employers, or obtain it electronically.
According to current law, oil spill payments for lost wages or business income are taxable. The law treats compensation for lost wages or income differently for tax purposes than compensation for physical injuries or property loss, which generally is nontaxable. Some issues, such as casualty losses, should be referred to a professional tax preparer.
For guidance in providing assistance to Gulf Oil Spill Victims, refer to Publication 4906, Gulf Oil Spill Overview & Guidance for VITA/TCE, and Publication 4899, Decision Tree — Gulf Oil Spill Affected Taxpayers. These publications and additional guidance, including frequently asked questions, can be found on www.irs.gov; keywords —Gulf Oil Spill Information Center.