Probe

The IRS does not do email. Period. If you get an email, it is a phishing scam. That is the good news. The bad news is the IRS does not do email. Everything is snail mail. For me, I have a mail forwarding service. I pay all bills online, so sometimes I don't get mail for 3+ months.

The other thing I learned, is you are not dealing with the IRS. You are dealing with somebody that works for the IRS. They have different agendas, and different levels of knowledge and experience.

The worst I heard, the guy was a di@k. They had to go to a meeting with their accountant with the the IRS. My first, the guy was friendly, scary knowledgeable (pilot stuff), and professional. Handled with a couple of mailings and phone calls. My current one is the second worst I have heard of. I am dealing with the village idiot at the wrong division of the IRS (ss-8). She dragged it out so long, I had to petition for the tax court. Now I am dealing with the IRS's lawyer, on her first case, I believe. The sister of the village idiot. I will win, even if I have to go to tax court. But it is still a pain in the a$$.

And I did everything correct, and above board. I owe nothing, legally.

NEDude

What a pain. I wonder how it works for people who have renounced their citizenship and the IRS decides to take a look at the filings from the period prior to the renunciation. I am not there yet, but I am considering it. I have been in Europe long enough and have zero plans on returning to the States to live. Due to the tax issue and now the banking and investment issues caused by FATCA, holding on the blue passport does not seem to make any logical sense.

Braniff DC8

Just be careful how you give it back! You may never step in the states again and imagine if an employer needs you to! I think Tina Turner might not be coming back for her next world tour.

The U.S. is not perfect but again people do try and cheat. Me, never a problem, at least not yet. I contacted the IRS myself and they told me all is ok. It may seem silly but I'd rather know ahead of time. Now I keep everything and send it in with my taxes so, no questions.

If you in fact get audited it's because your tax return was flagged for some reason.

I know a guy that's been audited three times and owes 60,000$ plus USD. He says it's not right and is fighting. Of course he does not tell you all the details like some things I mentioned in a previous post. I know for a fact he's trying to cheat the system. I know another guy personally that uses a different passport to enter and leave the U.S. even though he was born in the U.S. and has a U.S. passport. He has not filed in years and says he won't get caught. You'd think he'd say nothing as one phone call would fix that. I am not so mean as I know someday he'll get caught and it will be bad. I've told him and when I do he gets angry with me. Some just never listen.

My point is, DO NOT try and cheat EVER. Have a good accountant and have a lawyer you either know or someone else does so if it comes up. There is also the advocate which is quite good. I used them and they sorted an issue out for me. Went all the way to Washington.

NEDude

You MAY only be barred from entering the United States if the Department of Homeland Security has determined you renounced your citizenship for the purposes of avoiding U.S. taxes. The policy has been on the books since 1996 but has never been implemented and most legal experts question the legality of such a policy. Even though it has never been implemented, experts on renunciation advise people who are considering it to never mention taxes in the embassy/consulate interviews, and to make sure you are 100% tax compliant prior to renunciation.

Tina Turner did not renounce her citizenship, she relinquished it (big and very important difference) by virtue of obtaining Swiss citizenship with the purpose of relinquishing her U.S. citizenship. She has in fact made several trips back to the United States since relinquishing her citizenship.

The IRS does do random audits, it is quite possible to be audited even if your return is not flagged. That is part of the issue right now, the IRS has reduced the number of random audits for domestic returns, but it has significantly increased the random audits from overseas filers. So you can do everything 100% correctly, not have any red flags, and still get audited. This is part of the recent focus on expatriate Americans. Ever since the Swiss banking scandal the IRS and Treasury Department have been focusing on going after Americans overseas because the assumption is Americans overseas are hiding money. In many ways you are considered a tax cheat until proven otherwise. Your FBAR form has to be filed with the Financial Crimes Enforcement Network of the Department of the Treasury. So by virtue of having a bank account located overseas you are having to submit paperwork to a federal criminal investigation service.

Anyway I do agree you should do everything 100% above the board. But given the 80,000 pages of U.S. tax code, the target the federal government has put on your back by virtue of living/working overseas, the draconian penalties that can be assessed, and the many banking hassles those of us who permanently live overseas are now having to deal with, it makes renunciation much more attractive.

Braniff DC8

The Tina Turner thing was joke. I do not agree though that the audits are completely random. Random is random and I find it odd that they seem to be a lot of pilots getting randomly targeted. I bring up again the NWA P.O. Box issue in Tokyo years ago. I also keep bringing up personal knowledge that I have of individuals. All of the people all know are trying to be sneaky and have things to hide. Again, read the tests for the exclusions. You MUST meet either of the tests, if you do not, you cannot claim an exemption. Look at the UAL F/A again. The fact that she is even trying is crazy.

I am not a tax expert but have been through enough with the IRS to have some decent knowledge.

Checked in

I wouldn't expect that an employee working for a US airline would ever be eligible for the foreign tax break. The break is intended to be for people who work for foreign companies, and satisfy the physical presence test or have bonafide residence status outside the US.

Lucky8888

Some of you guys/gals may find this interesting...

The IRS has a bold, brand new power. It can take away your passport | Fox News

Probe

My legacy airline used to have a TDY base in HKG for a number of years. I heard they used the exemption. I don't know if what legal or not.

iflysky

This comes directly from IRS Pub. 54 (pg.34 QnA)

" 5) My U.S. employer pays my salary into my U.S. bank account. Is this income considered earned in the United States or is it considered foreign earned income?

If you performed the services to earn this salary outside the United States, your salary is considered earned abroad. It does not matter that you are paid by a U.S. employer or that your salary is deposited in a U.S. bank account in the United States. The source of salary, wages, commissions, and other personal service income is the place where you perform the services. "

However, despite the above provision, I still strongly recomend consulting a professional CPA or an attorney specializing in foreign taxes. Everyone's situation is different and can be interpreted differently by the IRS.

Lucky8888

You don't have to work for a foreign company to be entitled to the Foreign Tax Credit but you do have to satisfy either the physical presence test or have a bonafide residence outside the U.S. like you said. In other words, a person could work for a U.S. company abroad and so long as the residence test are met, they would be entitled.