Interview and Documents

Business income information may come from the following:

• Forms 1099-MISC, Miscellaneous Income, box 7, Nonemployee Compensation
• Forms W-2, Wage and Tax Statement with Statutory Employee checked in box 13
• Taxpayer's books and records
• Forms 1099-K, Merchant Card and Third Party Payments

Based on your interview and your review of the taxpayer's intake and interview sheet, you may discover that the taxpayer or spouse had business income from being self employed or working as an independent contractor. Taxpayers are self-employed if they carry on an unincorporated trade or business as a sole proprietor or independent contractor. These taxpayers may not have income statements for their business income and expenses. The information to prepare their tax return is from their records.

Carefully review the intake and interview sheet and ask follow-up questions to determine if the taxpayer or spouse had business income. Taxpayers may not think of themselves as "self-employed" if they have a small home business or work part-time as an independent contractor.

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.

Refer to Publication 4906, Gulf Oil Spill Overview & Guidance for VITA/TCE, and Publication 4899, Decision Tree - Gulf Oil Spill Affected Taxpayers. These publications are available on www.irs.gov. Additional guidance, including frequently asked questions, can be found on www.irs.gov; keywords—Gulf Oil Spill Information Center.