I can understand Cathay Pacific's (and other employers') position in this subject. The US IRS has a habit of chasing every last nickel they are entitled to. In addition, they have a (unwritten) policy of coming down VERY hard on companies that side with their employees against the IRS. Their position seems reasonable from a corporate point of view. Employees who earn money while in the USA need to fill out US tax forms for that income. In doing so, you will be given the opportunity to claim a credit for foreign income taxes paid (you DID pay your HK income taxes, I assume). The end result is that the credit will most likely zero out your US tax liability.