Washington (Jan. 22, 2003) -- Landowners, producers and tobacco quota owners who receive money from the National Tobacco Settlement Trust must report those payments as income each year, the Internal Revenue Service said Tuesday.The payments are considered gross income for federal tax purposes and are taxable as ordinary income. Many tobacco farmers and others associated with tobacco production receive settlement payments from the trust, which was established to provide aid to tobacco growers and tobacco quota owners. The payments compensate for lost revenue because of decreased demand for tobacco, and ease potential economic consequences in states where tobacco is grown.
Tobacco companies are required to make the payments as part of the National Tobacco Grower Settlement. Farmers in 14 states will receive the payments over a 12-year period that began in 1999. The 14 states are Alabama, Florida, Georgia, Indiana, Kentucky, Maryland, Missouri, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia and West Virginia.
"These payments are taxable as part of gross income and some of those who receive them may not be aware of that," acting IRS commissioner Bob Wenzel said. "Since these payments can range from hundreds to thousands of dollars, the possible penalties and interest charges for not reporting the income could be substantial. We want to help those who receive these payments avoid making an error on their tax returns."
-- Electronic Accountant Newswire staff
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access