Hello ALL.
On another thread; I was told if you fly another country aircraft registration, you can include the Foreign Earned Income Exclusion (FEIE) to that income while over International Water.
I have checked with two Tax accountants and the answer from both was NO.
Be careful; you are GUILTY until proven INNOCENT in regards to the IRS.

 

If you take tax advice from anywhere on the "Internet", without checking with a competent tax advisor, you deserve to be found "guilty". Stupid is as stupid does, Forrest.

Also, you're guilty (for all practical purposes) until proven innocent in all administrative law - not just with IRS (and FAA).

 

The whole thing is a crock of shi?.

The point of the Foreign earned income exclusion is that you shouldn't have to pay taxes for services you are not receiving. If you are living and working overseas you are not using:

1) U.S. schools
2) U.S. roads
3) Any U.S. social services
4) Police and Fire departments
5) etc, etc, etc

So this whole interpretation by the IRS is fundamentally flawed. If someone would spend the dollars to challenge them in court I would wager that the challenge would be successful.

They are just playing games with the wording since the wording states you must be in a foreign country.

For the people who have been audited on this they have gone to great lengths to show that their percentage of working time spent over international waters is negligible.

One guy I know had this audit when he was an F.O.. He wasn't going to pay any tax since his total income was well under the limit. After caluculating that 7% of his work time was over international waters he was still under the cap. So the IRS agent spent a fair amount of time on this and earned the U.S. government exactly $0.


TP

 

Is there any time that an audit on this been challenged that hasn't been won? All the instances that I have heard off have been won by the pilots.

 

Hey guys, I want to beleive as much as you that this interpretation is wrong. I will attaché the relative IRS ruling as soon as I can.
Dont kill the messenger. Thank You, happy weekend.

 

thanks rotor, I agree. All should take care in this issue. That is the reason I post this.

 

U.S. Citizens Performing Services in Foreign and International Airspace

check this out.

 

Has anyone looked up the official definitions of "services" etc in the IRC? Scattered throughout the 70,000+ pages of their convoluted code are words and catch phrases that are defined into specific definitions that do not suggest the obvious, and most of us do not fit their definition to tax us. Without going into too much detail, I didnt know we were "officers of a corporation" or "employees of the federal government" among other phrases they use to trick everyone into handing over all their money, bla bla bla. It makes for an interesting read, yet there is not much anyone can do about it unless youre lucky.

 

I am going through this exact scenario about flight time over international water right now. Another pilot from my legacy US airline went through it last year. We both flew for an asian carrier for a couple of years. He won his battle.

We get a letter from the IRS stating that 100 percent of our foreign income exclusion was denied because we were flying over water. It was 2-3 years prior so they tacked on penalties and 40% interest per year.
They claim it was "just to get our attention.

I had never heard of this, but the info they gave me says that any flight over international waters, outside of 3 miles from land, is US earned income, even on a foreign flagged carrier. I had to copy my logbooks and calculate time spent over international water.

Luckily only a very small amount (2% and 7%) of the two years was over water. I made enough that I should not owe any additional tax.

IRS Pr&$%cks.

 

That is why is pays to have a good tax accountant/lawyer when doing expat work.
The guy I use has had to re-educated the IRS on their rules more than once.