Originally Posted by
Typhoonpilot
"International waters" is not a foreign country. That is the IRS position that is causing so many audits of expat pilots. Truly petty and not in the spirit of the foreign earned income exclusion, but it's the U.S. government so I guess we shouldn't expect much else.
TP
When I first heard about this (my first audit 3 years ago) I thought it was a mistake, and still do. I believe it should be "on or over international waters in a US flagged vessel or aircraft". Any flagged vessel or aircraft is legally a little slice of the home country, and has special rights, no matter where it sits in the world. I don't think being over international water in a Chinese or UAE flagged aircraft should count as US income.
My current audit did not include this. It is just a determination of whether I was a contractor or employee. But the instructions for a form I used includes the term US flagged vessel or aircraft. I will try to find it and post it.
I worked with about 30+ americans at two jobs. All but a couple have been audited. Some twice, including me. After the first one they sent me a check for 600 or 700 dollars. This time they will just owe me a bunch more in foreign tax credits. Still a PITA