March 29, 2024
BANGOR DAILY NEWS (BANGOR, MAINE

Tax trouble in fishing industry garners attention from agencies

ST. GEORGE — A plan by the Internal Revenue Service and state taxation officials to spotlight the tax returns of the state’s fishermen is “no threat” to the industry, according to David Cousens, president of the Maine Lobsterman’s Association.

IRS officials have met with industry officials in order to gain greater exposure to current tax problems, Cousens said.

“They asked us to put their concerns in our newsletter. It seems pretty harmless,” Cousens said.

The Augusta District has formed a Fishing Initiative Compliance Team which consists of both IRS and State of Maine Bureau of Taxation employees. “Most people want to do what is right,” said Toni C. Moleon of the Maine IRS office. “However, their backgrounds, their geographical location and financial status have an effect on their degree of compliance with tax laws,” she said.

The IRS and State of Maine Bureau of Taxation have compared the state commercial fishing licenses with the tax returns filed during 1991 and discovered “a significant degree of confusion” regarding the type of tax return required. In many instances, holders of commercial fishing licenses are filing nonbusiness returns. More often than not, a business return (Schedule C) should be the form required, IRS officials said.

There also appears to be “confusion” regarding income from “sternman” employment. People are reporting this as wages on the return as opposed to a Form Schedule C, which is in turn subject to self-employment tax. In early December, the IRS mailed informational letters to those who filed nonbusiness returns and should have filed a business Schedule C. The taxpayers will be given an opportunity to voluntarily amend their return without penalties, IRS officials said.

More confusion exists on the fuel tax credit on diesel fuel for fishing boats, the IRS said. An examination of taxpayers who claimed a fuel tax credit in the year 1990 resulted in “a real eye opener,” the IRS said. After the IRS contacted them, over 200 taxpayers voluntarily submitted amended returns repaying a fuel tax credit erroneously claimed in 1990, 1991 and 1992. So far, more than $210,000 has been received from these taxpayers. These amended returns are accepted by the IRS and are not subject to penalties. A letter reminding those taxpayers who have not yet filed amended returns will be mailed soon. This letter may be the last opportunity for taxpayers to amend the returns penalty-free. The fuel tax credit has sparked a lot of interest, not only by fisherman, but also marine fuel distributors.

There is also confusion regarding the requirements to obtain a fuel tax exemption certificate. The IRS has been working with marine fuel distributors to ensure there is not only compliance, but also a total understanding of all requirements.

If you have a commercial fishing license and don’t file a tax return, the IRS is interested in you. More than 2,000 Maine residents who hold a fishing license did not file 1991 returns, the IRS reported. A large portion of these nonfilers are probably younger fishermen working as sternmen who do not receive the required 1099 form from the fishermen. A letter will be mailed to nonfilers advising them of the potential requirement for filing a tax return.

The IRS has established a hot line number, 764-6448, for tax facts for fishermen. This number can be used for tax questions and billing problems as well as general tax assistance for fishermen. The IRS will sponsor workshops throughout the filing season with an emphasis on the fishing industry. Taxpayer service will also be provided at the “grass-roots” level in some of the smaller communities. This service will be provided along the coast during the month of February.


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