Tax issues to be aware of!
01-18-2016, 07:11 AM
#21
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Thread Starter
Joined APC: Mar 2007
Posts: 1,067
Originally Posted by 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.
" 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.
01-18-2016, 07:18 AM
#22
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Joined APC: Aug 2005
Position: tri current
Posts: 1,485
Originally Posted by NEDude
The wording here is very interesting. It clearly states in this publication that if the money is earned outside the United States then it qualifies as foreign earned income. But the practice has been that only money earned in a foreign country counts. The difference being that in this publication you could make the case that money earned in international airspace should count for the foreign earned income exclusion because it is earned outside the United States. Of course this is the IRS/US government we are talking about here, so conflicting information should be no surprise..
"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
01-19-2016, 04:55 AM
#23
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Joined APC: Mar 2007
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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
TP
01-19-2016, 11:13 AM
#24
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Joined APC: Sep 2006
Position: B767 FO
Posts: 125
Originally Posted by NEDude
But "International Waters" is "outside the United States". Like I said, the wording in the IRS publication contradicts the practice of the IRS.
"To meet the bona fide residence test or the physical presence test, you must live in or be present in a foreign country. A foreign country includes any territory under the sovereignty of a government other than that of the United States.
The term “foreign country” includes the country's airspace and territorial waters, but not international waters and the airspace above."
01-19-2016, 07:36 PM
#25
Don't say Guppy
Joined APC: Dec 2010
Position: Guppy driver
Posts: 1,926
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
TP
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
01-22-2016, 11:17 PM
#26
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Joined APC: Feb 2013
Posts: 1,339
Originally Posted by got2fly
There is no news here. You can live overseas, but if you are employed in the USA there is no foreign earned income exemption because it is not foreign earned income! I lived and worked overseas and had the foreign earned income exemption...
..There is no mystery here. Just follow the rules. Turbotax basic or H&R Block basic software or will keep you out of trouble.
..There is no mystery here. Just follow the rules. Turbotax basic or H&R Block basic software or will keep you out of trouble.
"...The second issue at hand is that the Supreme Court refused to hear the case of an United flight attendant, who is an American citizen and based in Hong Kong, who attempted to claim the foreign income exclusion for all of her income.."
She merely wanted the US to treat foreign income the way most of of the world does. The US is one of very few countries where - as long as you're a citizen - you have to pay US income taxes (above the exclusion) no matter what. ..of course, since that person lives in another country, often permanently, he or she also pays taxes there..
For example - let's say you were born in the US and as a child moved to Canada, have lived there your entire life, paid taxes there, got married there, are a permanent resident ("green card" holder) or even a citizen there and have no plans of ever moving to the US - as long as you have a US passport - you have to pay US income tax (above the exclusion).
That's what this flight attendant was trying to challenge. Most countries allow you to keep your citizenship and won't charge you taxes even if you choose to live somewhere else permanently as long as you don't use their benefits (health care, pension, etc.) you shouldn't have to surrender your US passport to avoid paying US taxes.
From the article below:
Unlike most countries, the U.S. taxes citizens on all income, no matter where it is earned or where they live..
http://money.cnn.com/2015/05/08/pf/t...orts-renounce/
Last edited by whalesurfer; 01-22-2016 at 11:29 PM.
01-23-2016, 06:19 PM
#28
Don't say Guppy
Joined APC: Dec 2010
Position: Guppy driver
Posts: 1,926
Originally Posted by whalesurfer
Read the post again. Yes, there's definitely news here and your situation had nothing to do with what the flight attendant was trying to achieve.
"...The second issue at hand is that the Supreme Court refused to hear the case of an United flight attendant, who is an American citizen and based in Hong Kong, who attempted to claim the foreign income exclusion for all of her income.."
She merely wanted the US to treat foreign income the way most of of the world does. The US is one of very few countries where - as long as you're a citizen - you have to pay US income taxes (above the exclusion) no matter what. ..of course, since that person lives in another country, often permanently, he or she also pays taxes there..
For example - let's say you were born in the US and as a child moved to Canada, have lived there your entire life, paid taxes there, got married there, are a permanent resident ("green card" holder) or even a citizen there and have no plans of ever moving to the US - as long as you have a US passport - you have to pay US income tax (above the exclusion).
That's what this flight attendant was trying to challenge. Most countries allow you to keep your citizenship and won't charge you taxes even if you choose to live somewhere else permanently as long as you don't use their benefits (health care, pension, etc.) you shouldn't have to surrender your US passport to avoid paying US taxes.
From the article below:
Unlike most countries, the U.S. taxes citizens on all income, no matter where it is earned or where they live..
Record 1,335 Americans give up their passports - May. 8, 2015
"...The second issue at hand is that the Supreme Court refused to hear the case of an United flight attendant, who is an American citizen and based in Hong Kong, who attempted to claim the foreign income exclusion for all of her income.."
She merely wanted the US to treat foreign income the way most of of the world does. The US is one of very few countries where - as long as you're a citizen - you have to pay US income taxes (above the exclusion) no matter what. ..of course, since that person lives in another country, often permanently, he or she also pays taxes there..
For example - let's say you were born in the US and as a child moved to Canada, have lived there your entire life, paid taxes there, got married there, are a permanent resident ("green card" holder) or even a citizen there and have no plans of ever moving to the US - as long as you have a US passport - you have to pay US income tax (above the exclusion).
That's what this flight attendant was trying to challenge. Most countries allow you to keep your citizenship and won't charge you taxes even if you choose to live somewhere else permanently as long as you don't use their benefits (health care, pension, etc.) you shouldn't have to surrender your US passport to avoid paying US taxes.
From the article below:
Unlike most countries, the U.S. taxes citizens on all income, no matter where it is earned or where they live..
Record 1,335 Americans give up their passports - May. 8, 2015
01-24-2016, 06:44 AM
#29
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Joined APC: Feb 2013
Posts: 1,339
Originally Posted by Probe
Except for taxi time, almost of a HK based UA flight attendant would be "on over over international water".
01-24-2016, 06:58 AM
#30
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Thread Starter
Joined APC: Mar 2007
Posts: 1,067
Originally Posted by whalesurfer
Read the post again. Yes, there's definitely news here and your situation had nothing to do with what the flight attendant was trying to achieve.
"...The second issue at hand is that the Supreme Court refused to hear the case of an United flight attendant, who is an American citizen and based in Hong Kong, who attempted to claim the foreign income exclusion for all of her income.."
She merely wanted the US to treat foreign income the way most of of the world does. The US is one of very few countries where - as long as you're a citizen - you have to pay US income taxes (above the exclusion) no matter what. ..of course, since that person lives in another country, often permanently, he or she also pays taxes there..
For example - let's say you were born in the US and as a child moved to Canada, have lived there your entire life, paid taxes there, got married there, are a permanent resident ("green card" holder) or even a citizen there and have no plans of ever moving to the US - as long as you have a US passport - you have to pay US income tax (above the exclusion).
That's what this flight attendant was trying to challenge. Most countries allow you to keep your citizenship and won't charge you taxes even if you choose to live somewhere else permanently as long as you don't use their benefits (health care, pension, etc.) you shouldn't have to surrender your US passport to avoid paying US taxes.
From the article below:
Unlike most countries, the U.S. taxes citizens on all income, no matter where it is earned or where they live..
Record 1,335 Americans give up their passports - May. 8, 2015
"...The second issue at hand is that the Supreme Court refused to hear the case of an United flight attendant, who is an American citizen and based in Hong Kong, who attempted to claim the foreign income exclusion for all of her income.."
She merely wanted the US to treat foreign income the way most of of the world does. The US is one of very few countries where - as long as you're a citizen - you have to pay US income taxes (above the exclusion) no matter what. ..of course, since that person lives in another country, often permanently, he or she also pays taxes there..
For example - let's say you were born in the US and as a child moved to Canada, have lived there your entire life, paid taxes there, got married there, are a permanent resident ("green card" holder) or even a citizen there and have no plans of ever moving to the US - as long as you have a US passport - you have to pay US income tax (above the exclusion).
That's what this flight attendant was trying to challenge. Most countries allow you to keep your citizenship and won't charge you taxes even if you choose to live somewhere else permanently as long as you don't use their benefits (health care, pension, etc.) you shouldn't have to surrender your US passport to avoid paying US taxes.
From the article below:
Unlike most countries, the U.S. taxes citizens on all income, no matter where it is earned or where they live..
Record 1,335 Americans give up their passports - May. 8, 2015
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