EK: is the potential tax liability too great for US pilots?

[Desdihold]

Attached is a link to an article from today's National newspaper.
It details the tax liability of US citizens living overseas.
US pilots are further at risk as the IRS are auditing American pilots at Emirates one by one. It looks as if the IRS has a copy of the EK seniority list detailing nationality and rank, date of hire.

Uncle Sam’s demands on tax go far and wide | The National (http://www.thenational.ae/business/personal-finance/uncle-sams-demands-on-tax-go-far-and-wide)

[LearBus]

How would the IRS obtain such a list?

[The Dominican]

Not sure what you mean with the potential tax liability being too great:confused:
The tax responsibility as a US citizen hasn't changed at all! It is the same as it always has been, as a matter of fact, the amount of money that you can deduct for the tax exemption has been increasing steadily.....! This is very simple, don't cheat on your taxes, declare your foreign accounts to the IRS, don't pretend to be smarter than everyone else, have a professional that is well versed into foreign income do your taxes and there will be no issue:ok:

[The Dominican]

BTW....., this is NOT only for US citizens, citizens from all western countries should expect similar additional scrutiny from their governments on the issue of income earned abroad......!

[what_goes_up]

BTW....., this is NOT only for US citizens, citizens from all western countries should expect similar additional scrutiny from their governments on the issue of income earned abroad......!
Luckily the US is the only country I know of where citizens have to pay taxes living abroad. Others only pay taxes on income made in the country or on property... Phew...

[Vortac1]

Here's the bread and butter from the US IRS on expat income. It's actually pretty straight forward. There's no secrets about it. As mentioned above, it's when you try to pull a fast one on the government that you actually start getting tangled up on grey areas and such.

IRS Publication 54 (http://www.irs.gov/pub/irs-pdf/p54.pdf).

The whole document is a good read (mandatory read if you are a US expat, IMHO), but pay special attention to Chapter 4 - Foreign Earned Income Exclusion/Deduction.

[Old King Coal]

The USA fought the War of independence, much in order to avoid paying tax to the UK, and yet now it taxes its citizens whom work overseas; whereas the UK does not. The irony should not be lost upon us. :wrygrin:

[what-to-do]

God Save the Queen :D

[Craggenmore]

How would the IRS obtain such a list

Probably Globaleye.

[nakbin330]

If the IRS can pressure governments, they can surely pressure EK.

[fliion]

While it is a stress inducing thought to be audited by the IRS, I'm speculating that the guys who file with 'reasonable' (subjective obviously) numbers will be okay...

There are however US passport holders who have another national identity (& passport) closer to their heart who do not file at all...or materially understate their earnings....this is low hanging fruit ...and has extremely serious consequences for those individuals. We are talking about a felony offense., big fines etc.

It's gets interesting if and when you do get audited - if you lie to a Federal Officer - now you are talking about jail time.

What has probably brought this about (I have heard that they had a team from the IRS in payroll for two weeks in March) - is that if you do get audited, which has happened to EK pilots - there is a system whereby if you are in a spot of trouble you can mitigate the punishment by providing information to the IRS that would help them catch bigger fish and more revenue...

...perhaps explaining the development .

Get an accountant and file...it's the only way.

f.

[casablanca]

If you do your homework....and just don't lie then basically the first 100,000 is tax free. But some people, get bad tax advice. Flew with one fo who said he doesn't file...just like he is unemployed. Those are the people that need to be worried.

[Boeingrestricted]

Just renounce citizenship at any given time when they knock on your door and/or declare yourself a sovereign citizen as the 350000 others have done (while living in the USA)

[fliion]

The irony of your post is that if you renounce US citizenship; it's an automatic IRS audit of the previous SIX years...

... And then what...move to Turkey?

Ehh not...i like youtube

:)

f.

[Boeingrestricted]

Don't look at the details look at the bigger pics. The target was and is always the people, to enslave 'em etc. etc. (look at some 'revelations' made by George Carlin and others). Turkey is now setting a precedence regarding U tube which, if successful will lead to other restrictions and eventually be followed by other Nato members under different guises (popa/pipa or Acta the one recently discussed among all nations in DXB = Internet regulatory laws) .
You have various tools at your disposal, that's all I wanted to point out. If you love the US(or any other nations for that matter) and nationalism is important to you, hey then just pay .
But you can get around them if individualism and people in general are important to you irrespective the nationality (divorce, renounce and get married later with your wife for the citizenship etc etc if its important to you)

[fliion]

Ooookay...

Back to taxes

doh!

f.

[Panther 88]

The auditing issue appears to be TCOs (tax compliance officers), hired guns by the IRS not allowing the Foreign Resident Tax exclusion. Guys are having to send in flight plans to their attorney to prove the time that they were not over international waters or US airspace. There is no logic to it at all, but when did the IRS ever operate with logic. So it appears that the time one is over international waters or US airspace, one loses the foreign exemption. :ugh: Solution? No one seems to have one. Eventually, it will get kicked upstairs to an IRS agent, who has the ability to settle. Settling usually ends up being a lot less than a full out, with attorneys, appeal process.

[Captain Charisma]

@what_goes_up

New Zealand citizens are taxed on ALL their overseas earnings if they have an enduring relationship with NZ. The definition of this 'enduring relationship' is far reaching and a look at the IRD website will show what a minefield it is.
Any Kiwis working in this part of the world should have a good look at how their personal circumstances stack up with the IRD's interpretation of things or they could have a surprise in the future. :sad:

[twentyyearstoolate]

Ah good little tax slaves giving to your Master. All Governments will get more and more intrusive and greedy no matter where you are a "Citizen" in the western world.

Whilst Turkey has some very restrictive ideas surrounding the Internet (current leader is a Psychopathic Despot), and it will get worse, it is a **** LOAD better than the Middle East(Dubai/AbuDhabi from personal experience)!

[jack schidt]

Do not try to spread fear with the statement that all western pilots have to pay tax on earnings made overseas. In the UK, having had a professional tax return specialist, the tax man wrote to tell me not to file any returns anymore. The reason for this is, I do not make my money in the UK, nothing I have in the UK is making money above the taxable income band and it costs the inland revenue time and money to process a return that gives them nothing.

If you want to hold a passport for your democratic USofA, then you have to pay for it and will continue to pay. Have a look at the US national debt clock, the US is in deep poo and they need you to keep paying them wherever you are so they can continue to generate revenue which is spent, but not on paying off the debt.

[Desdihold]

Attached is an interview with an IRS tax compliance officer,
Her stance is that she there to help the customer. The reality is that her internal progression within the IRS is based upon how much she takes in by sending out demand letters ( as I understand it they are demand letters not audit letters)

It looks as if most of the letters are coming from an IRS office in
Charlotte. Either one officer or an office feels they are on to something of a gold vein.

Flying over international waters issue.... It looks as if they are cut and pasting maritime law and applying it to pilots.

http://m.youtube.com/watch?autoplay=1&v=MDIDtFj9Cj4

[NGFellow]

The area that is sometimes overlooked is that you must declare the dollar value of benefits in addition to salary alone. Therefore, housing, school allowance, transport, annual free tickets etc are all to be declared. For most, adding these will exceed the normal tax free exclusion provided and there might be some tax liablity.

Also don't forget the FBAR's to be filed each year for ANY overseas bank account that has a balance exceeding $10,000 anytime during the year. Not filing can attract a major fine and jail time.

[Boeingrestricted]

"If you want to hold a passport for your democratic USofA, then you have to pay for it and will continue to pay. Have a look at the US national debt clock, the US is in deep poo and they need you to keep paying them wherever you are so they can continue to generate revenue which is spent, but not on paying off the debt."

If you love the stars and stripes , you gotta pay ! Not that anything will change regarding the debtclock , it will continue to rise.

And yes twentytwoyearstoolate you are smack on. This taxation disease will only grow into the other nato member states.

And Ngfellow you are also absolutely right! Regarding the 10000$ rule; The banking system (so that means any bank) is in bed with the governments of the western nations. And this is how they KNOW the gold vein is there. The policy makers are only looking how to make this look acceptable to the public without making too much noise.

[twentyyearstoolate]

Do not try to spread fear with the statement that all western pilots have to pay tax on earnings made overseas. In the UK, having had a professional tax return specialist, the tax man wrote to tell me not to file any returns anymore. The reason for this is, I do not make my money in the UK, nothing I have in the UK is making money above the taxable income band and it costs the inland revenue time and money to process a return that gives them nothing.

If you want to hold a passport for your democratic USofA, then you have to pay for it and will continue to pay. Have a look at the US national debt clock, the US is in deep poo and they need you to keep paying them wherever you are so they can continue to generate revenue which is spent, but not on paying off the debt. And you really think Governments won't change this to become more restrictive? Jack.... you're dreaming son! (I wish I were wrong!!)

As to the UK, I don't know your personal situation. But I was looking at getting a home there to go on my days off, but with the new tax ruling that came in effect April 2013, having ANY ties with the UK, even a house that you only use occasionally, you will be deemed resident for tax. Although they have purposely made it a grey area, your "tax specialist" is wrong if he is just quoting you earning your money overseas makes you safe. Not so! Go read the new ruling!

I'd better go, as I have so many other websites to spread the fear of governments and taxation :}

[TheDarkHorse]

Just been told that Uncle Sam and UAE Central Bank are in bed together. FATCA is the reason? I am glad I have a unicorn on my passport.

Twenty - You're correct to a degree, it is a grey area as are many legalities in the U.K. I know I read law. They have a definition of just how tied to the U.K you are. If you own a property you can rent it out and not be deemed a resident, if you hold a UAE visa you are non dom for U.K. I have 2 houses both of which family live in (Grandmother + Uncle) and I'm joint on the deeds but I'm not deemed resident. I have a U.K account and credit card still, but provided I'm not earning and don't go use NHS every day HMRC have no issues.
All money earned overseas however IS tax free provided you are not resident. So if I take 1m USD back to the U.K which was earned overseas then I keep my 1m USD (as an example to make a point)

[Metro man]

At least EK pilots don't have to deal with the commuting issues facing some CX pilots. Many an Australian has been caught out by claiming to be Hong Kong resident while having a house and family in Sydney and visiting them every month.

[BYMONEK]

TheDarkHorse and jack schidt

Couple of points and apologies for slight thread drift as UK not USA.

Firstly, if you earn any income from any source in the UK then it is most likely a requirement to file an annual tax return. If the tax office have actually told you not to bother then I'd ensure you have a copy of that correspondence and keep it somewhere safe. If it's an accountant, get advice from someone who specializes in overseas matters. Regardless of wether you're classed as resident or not, income generated within the UK must be declared, even if it's below the personal threshold. You will pay 25% tax on income generated over your allowance.

Secondly, if you do fall into the category above, say your income on property rentals exceeds the personal tax free allowance, then a proportion of your salary earned in EK also will be taxed against time spent in the UK during work. In the scenario above, you could spend 89 days a year on holiday without further tax liability. However, your once a month Manchester or Birmingham trip will incur a charge. It uses a formula of salary, total hours/trips and time spent in UK. Each UK trip is worth 2days. If you don't earn above the personal tax threshold, the tax on partial salary does not apply. Tax on income will only be charged if the personal allowance is exceeded!

All of the above as well as far more complicated definitions of UK domiciled, resident have been brought in to generate income from those dodging the system. It also stops the BA 'Nigels' of this World not paying tax on their super B747-400 pay while they sun it in Nice and St.Tropez.

For the vast majority of EK pilots this will not be an issue but cover all bases and if it means getting sound financial advice, do so. What pennies you may be saving now could cost you dear if the tax man comes knocking and your house is not in order.....even if it is in Meydan!

[Desdihold]

Re: US IRS

Not correct. The (US) IRS are specializing in US pilots at ME airlines. We are a soft target and the same tactics used on pilot A can be used on pilot B as our compensation packages are standardized.
I know of three pilots who have received such letters and they probably know of three more each.
These letters are classic shakedown policies, they shake the tree and see what falls out. They only problem for us is that they see a forest of several hundred trees all nicely lined up in a row (a seniority list) and they will shake what ever tree they want.

The production line system worked for Henry Ford and now the IRS is making it work for them.