Tax liable - all crews flying to the US?

[LGB]

In Cathay Pacific, all flight crew, cabin crew, ground crew ... have just been advised that they need to file tax, if they fly to or work in the US.

Has anyone else heard of a similar demand? If you fly to the USA - who do you work for, and did your airline tell you that you will now have to file tax in the USA?

This includes crews with no connection to the USA (citizenship, green card etc). It is nearly impossible to avoid flying to the USA if you fly for CX, unless you fly the A330 only.

It is CX that is informing this to the pilots. It's not the US IRS demanding it from CX pilots directly. Chances are that this is (yet another) mistake by CX, like previous on-shoring, closing of bases and other legal mishaps.

More info here:

https://www.pprune.org/fragrant-harbour/627999-us-tax-question.html

[Flying Clog]

Cathay Pathetic incompetence at its finest.

[Airbubba]

Don't you guys have a union? What is their position on this stuff?

Is Cathay turning this information over to the IRS? :confused: Hong Kong doesn't have a tax treaty with the U.S. from what I read online.

The UK, the State of California and various U.S. cities have attempted to tax non-resident crewmembers for time spent in their airspace and on the ground during layovers.

Just ask any pilot if you want tax advice. Some have the courage of their convictions in this area. ;)

The federal prison at Eglin AFB has excellent tennis courts from what a colleague once told me. :D

[Pearly White]

Unless you're paid in the US, it's hard to see how you could be taxed there. And if you're being taxed in your base jurisdiction (say HKG) you wouldn't be liable to pay tax again on the same earnings in some other jurisdiction.

[Jim59]

Unless you're paid in the US, it's hard to see how you could be taxed there. And if you're being taxed in your base jurisdiction (say HKG) you wouldn't be liable to pay tax again on the same earnings in some other jurisdiction.

False if you are a US citizen.

[Airbubba]

Unless you're paid in the US, it's hard to see how you could be taxed there. And if you're being taxed in your base jurisdiction (say HKG) you wouldn't be liable to pay tax again on the same earnings in some other jurisdiction.

I'd say from personal experience that both of those assertions are wrong. ;)

[Paul852]

Unless you're paid in the US, it's hard to see how you could be taxed there. And if you're being taxed in your base jurisdiction (say HKG) you wouldn't be liable to pay tax again on the same earnings in some other jurisdiction.As Airbubba says, these are both incredibly naive assumptions. The first is completely wrong (I was paid for several years in the UK but taxed in HK, for example). And the second assumes a comprehensive avoidance of double taxation agreement between the jurisdictions concerned (which is far from a given), and your citizenship not being one that taxes on that basis rather than on residence.

[Spooky 2]

California tried to tax me once upon a time. Living in Utah and based in LAX, flying all international. They stood down and went away after telling them they had no jurisdiction over my payroll. Utah was collecting the state tax during this period.

[Airbubba]

The wheel gets reinvented with U.S. pilots and taxes every few years. Some genius comes up with a scheme to avoid state and/or federal taxes. His buddies get in on the deal and it works great. For a few months.

Then one pilot gets busted, he turns in his (or her) buddies and the feds and the state file felony charges.

An example, some Northwest pilots figured they would claim their home address was a rented mailbox in ANC.

Tax probe now includes 42 Northwest Airlines employeesJan 29, 2003Associated Press

ST. PAUL -- A tax-cheating probe now includes 42 Northwest Airlines employees, and investigators have said that some pilots may have conspired to avoid paying Minnesota income tax, the St. Paul Pioneer Press reported today.

The paper cited state Revenue Department and Hennepin County officials as saying the probe has been expanded.The case previously involved seven Northwest pilots who were charged with tax evasion. They were accused of collectively owing $321,000 in unfiled taxes since 1996. Two have been convicted.

The 42 people under investigation include the original seven pilots who were charged. It also includes six new criminal probes, and 29 which are being pursued as civil cases.

The criminal cases all involve pilots. Most of the civil cases involve pilots, too, although other Northwest employees are also included, the newspaper reported. Prosecutors face less of a hurdle in bringing the civil cases, since they don't have to prove the "willful intent" necessary to win criminal convictions.

Authorities also have been looking for evidence of a conspiracy among pilots. A search warrant in the case of pilot Randall Enyeart of Excelsior, whose trial begins Monday in Hennepin County District Court, suggests pilots may have worked together.

According to the warrant, Enyeart's now-deceased brother told the state's Criminal Investigation Division that Enyeart was "willfully evading" Minnesota taxes by claiming to be a resident of Alaska, which has is no state income tax.

"He (Enyeart's brother) stated that several NWA pilots were sharing an address in Anchorage, Alaska, as their residence while retaining permanent residences in other locations," the warrant says.

Enyeart's attorney, Bob Sicoli of Minneapolis, said it's wrong to assume the warrant suggests that pilots cooperated with each other to evade taxes. He noted the warrant cannot be used as evidence, and said Enyeart is innocent.

Hennepin County prosecutors are handling the criminal cases for the state. In addition to the first two pilots who were convicted, and Enyeart, four others face trial dates over the next three months. Six others are under investigation, and may soon face criminal charges, said Hennepin County Attorney [now U.S. Senator D-Minn. and 2020 Presidential Candidate] Amy Klobuchar.

Last October, in the first pilot case, Dakota County Judge Karen Asphaug found Geoffrey Hickman of Mendota Heights guilty on five counts of tax evasion. The judge reduced the charges to a misdemeanor and sentenced Hickman to 150 days in jail. That ruling is under appeal.

A Northwest spokesman declined comment on the cases and ongoing investigations.


Here's another pilot scheme that's up for renewal, the tax church:

January 6, 1981 (UPI) HOUSTON -- An attorney for 10 Braniff Airways pilots who declared themselves ministers of the Basic Bible Church of America, obtained a church building, then stopped paying income taxes, said Monday he expects his clients to be indicted for tax fraud.

Lawyer Jerry Birnberg made the statement as another client, former Texas International Airlines pilot Charles L. Kageler, was sentenced to four years in prison and fined $5,000 for claiming tax-exempt status on his mail-order ministry in a Minnesota church.

Kageler, 47, of Meridian, Texas, also must serve five years probation after release from prison.

According to evidence presented during his trial, Kageler in 1977 paid $750 to a Minnesota man who issued a charter for the 'Basic Bible Church of America, Order of Almighty God, Chapter 7903.'

Testimony showed Kageler then took a vow of poverty, deeded to the church all his assets and future income, and refused to pay income taxes. Defense attorney Jerry Patchen said Kageler was not motivated by greed, and thought he was taking advantage of a legitimate tax loophole.

Although Kageler insisted he was a genuine minister who performed marriages and held religious services, government prosecutors successfully argued the church and the vow were a sham designed to avoid paying federal income taxes. Kageler was convicted in November of illegally withholding $40,000 in taxes from the Internal Revenue Service from 1977 through 1979.

As a TIA pilot of 20 years, Kageler was earning about $60,000 annually, prosecutors said.

Following Kageler's sentencing, his defense lawyer said the U.S. attorney's office in Fort Worth had been investigating the 10 Braniff pilots for the last year.

Birnberg said the cases had no direct link other than that both Kageler and the Braniff pilots all joined the same church.

Kageler has been on leave without pay from TIA. Braniff spokesman Jere Cox said Braniff had taken no action against any of its pilots being investigated.

[Pickuptruck]

It’s pretty simple, crew who hold greencards have been lying about it to the company and the IRS. They avoid paying US tax but the company gets fined big time when the IRS finally connects the dots............as the IRS usually does.
They then get in strife with the company, who isn’t happy about paying the IRS big fines. The AOA gets involved, “they only lied, you only got fined, no harm done” etc.
Pilots and tax, this sh*t never gets old......

[LGB]

It’s pretty simple, crew who hold greencards have been lying about it to the company and the IRS. They avoid paying US tax but the company gets fined big time when the IRS finally connects the dots............as the IRS usually does.
They then get in strife with the company, who isn’t happy about paying the IRS big fines. The AOA gets involved, “they only lied, you only got fined, no harm done” etc.
Pilots and tax, this sh*t never gets old......

The issue here is for pilots who have no connection to the USA, other than operating in and out, including layovers for duty time regulation purposes. No passport, green card, address, business or even relatives there.

If all states did this, then pilots in international operations would typically have to file taxes for dozens of different tax jurisdictions.

Clearly, that is not possible.

Apart from the paid taxes, imagine the combined fees for tax advisors. There is only 100% of your salary available, and ideally, some of that salary goes to the flight crew in question, to pay their bills and maybe even ... have some fun with their earnings.

This is not about having fake addresses in mail boxes, avoiding tax by being off shore. Living and working in Hong Kong, paid in Hong Kong, paying tax in Hong Kong. Should US long haul pilots start paying tax in Hong Kong, China, Australia, UK, Germany, Holland or wherever they happen to be sent to by their employer?

I am just curious to know - has any other long haul pilot, working for a non-US carrier, being non-US-resident/green card/passport holder, been met with similar demands?

[LGB]

Crew members. Compensation for services performed by a nonresident alien in connection with the individual's temporary presence in the United States as a regular crew member of a foreign vessel (for example, a boat or ship) engaged in transportation between the United States and a foreign country or U.S. possession is not U.S. source income and is exempt from U.S. tax. This exemption does not apply to compensation for services performed on foreign aircraft.


From http://myattorneyusa.com/storage/upload/files/matters/irs-tax-guide-for-aliens.pdf

Does any other non-US airline impose the same requirement, for their crews to file US taxes?

[Way too low]

I mean really. Don't think so as being foreign flight crew

[LGB]

I mean really. Don't think so as being foreign flight crew

It's not about "think", unfortunately. Agree, it doesn't make sense, for should ever state do this, then long haul pilots would be declaring taxes in dozens of states.

If they try to pull this one off, then I hope that every nation affected will retaliate ASAP.

[Deltasierra010]

Although the U.K. does not have different state taxes where your main home decides where you pay taxes. The term “Domiciled” is used so if you are an Expat and live in Spain you pay Spanish taxes, as part of that is you cannot live in the UK for more than half the year. There are very complex and strict rules and the revenue are very tenacious overseeing expat tax accounts.
An airline pilot UK citizen could “domicile” himself in HK pay tax there but could not visit U.K. for more than 183 days a year, but if he had a wife and kids in the UK there would be problems.

[Airbubba]

Although the U.K. does not have different state taxes where your main home decides where you pay taxes. The term “Domiciled” is used so if you are an Expat and live in Spain you pay Spanish taxes, as part of that is you cannot live in the UK for more than half the year. There are very complex and strict rules and the revenue are very tenacious overseeing expat tax accounts.
An airline pilot UK citizen could “domicile” himself in HK pay tax there but could not visit U.K. for more than 183 days a year, but if he had a wife and kids in the UK there would be problems.

The rules are stricter for U.S. citizens and green card holders.

Foreign Earned Income Exclusion - Physical Presence TestYou meet the physical presence test if you are physically present in a foreign country or countries (https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion-tax-home-in-foreign-country) 330 full days during a period of 12 consecutive months. The 330 qualifying days do not have to be consecutive. The physical presence test applies to both U.S. citizens and U.S. resident aliens.

The physical presence test is based only on how long you stay in a foreign country or countries. This test does not depend on the kind of residence you establish, your intentions about returning to the United States, or the nature and purpose of your stay abroad. However, your intentions with regard to the nature and purpose of your stay abroad are relevant in determining whether you meet the tax home test, as explained under Chapter 4 of Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad (https://www.irs.gov/forms-pubs/about-publication-54).
https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion-physical-presence-test

[Just the fax maam]

No tax without representation! :O

[Paul852]

No tax without representation! :O
Sadly, although that works for Americans, it doesn't work for many others... As a Brit who has been in HK for more than 15 years I still have to pay tax on UK pension income, but I have no vote there.

[wiggy]

Sadly, although that works for Americans, it doesn't work for many others... As a Brit who has been in HK for more than 15 years I still have to pay tax on UK pension income, but I have no vote there.

Yup, as a British National resident off shore for >15 years, still paying U.K. NI and income tax on U.K. income tax but disenfranchised I agree..

[UltraFan]

In Cathay Pacific, all flight crew, cabin crew, ground crew ... have just been advised that they need to file tax, if they fly to or work in the US.

Advised by whom? Was it an official letter? Was it a public announcement? If not, it's likely a bad joke, and I suggest you find the source. Meanwhile, the best way is to ask a direct question. NOT here. If you don't have a union representative, contact the company by sending an official inquiry to the Chief Financial Officer or General Counsel, or both. Their email addresses should be on the website. If it's official, they'll confirm it. If not, they'll rebut it. But in any case, they'll know there is a problem and they need to exaplain it to their people.

Personally, I think it's a bunch of crap.

[marchino61]

There is another thread on this subject, which has not attracted many posts. So I'll repost here what I posted there, with a few modifications:

Aircrew are often exempted under various double taxation treaties. For example, the US-UK double taxation treaty exempts UK-based aircrew from US tax.

This is covered in Article 14, paragraph 3 of the US-UK treaty.
https://www.gov.uk/government/public...a-tax-treaties (https://www.gov.uk/government/publications/usa-tax-treaties)

For some reason, Hong Kong has no double taxation treaty with the USA, even though it has treaties with many other countries.

You can be taxed pro-rata on how much working time you spend in country, as a non-resident.

See Chapter 3 of The US Tax Guide for Aliens, Publication No. 519 of the IRS (" Services Performed
for Foreign Employer"). Income up to $3,000 per annum is exempted but thereafter income earned while in the US is taxable.
https://www.irs.gov/pub/irs-pdf/p519.pdf

[homonculus]

1 An employer cant dictate who files tax returns. That is a matter for legislation, and in this case the IRS
2 You are only taxed on your worldwide income if you are tax resident - in the US that means a citizen, a green card holder or if you spend over 120 days a year in the US or its territories (but the calculation is based over 4 years on a sliding scale)
3 Many countries, eg the UK, have special rules for seamen or people working on ships and some have extended this to other forms of transportation
4 The US will tax you on income earned in the US. For example if you are paid for consultative work by a US company. This is regardless of residency or time in the country. If there is a double taxation treaty with your country of residence, you can claim relief from tax on that amount in your own country but only if the same money would be taxed in your country and to the amount of tax you would have paid

So your employer is irrelevant. If you are not US tax resident you dont pay tax UNLESS the IRS has changed their interpretation of the tax code or the tax code has been changed by Congress. It would be sensible to seek advice whether this has happened from a US CPA as opposed to taking advice, including mine, on Pprune

[LGB]

Advised by whom? Was it an official letter? Was it a public announcement? If not, it's likely a bad joke, and I suggest you find the source. Meanwhile, the best way is to ask a direct question. NOT here. If you don't have a union representative, contact the company by sending an official inquiry to the Chief Financial Officer or General Counsel, or both. Their email addresses should be on the website. If it's official, they'll confirm it. If not, they'll rebut it. But in any case, they'll know there is a problem and they need to exaplain it to their people.

Personally, I think it's a bunch of crap.

Oh yes, it's being worked on by the union.

I am just curious whether or not any other non-US long haul airline has asked its pilots to start declaring tax in the US.

I agree it's insane, but then ... it's Cathay. They have been excelling at this for decades.

[UltraFan]

Oh yes, it's being worked on by the union.

I am just curious whether or not any other non-US long haul airline has asked its pilots to start declaring tax in the US.

I agree it's insane, but then ... it's Cathay. They have been excelling at this for decades.

US does tax foreign individuals but only if they spend certain amount of time in the US or participate in the US economy, neither of which is your case. Besides, US tax laws clearly state that any foreigner who has already paid taxes in his own country will have that sum deducted from his taxes due in the US. And I've never heard of any foreign airline employees having to pay taxes in the US. Or anywhere for that matter, other than their country of residence. They cannot be considered residents because they come on a D-1 or D-2 visa.

[OLVpilot]

I’m sorry to hear your company has decided to pursue this delusional venture.

As an American who used to fly abroad and has a non-citizen spouse, let me offer y’all some clarification and hopefully quell any fear you have...

Unless you are a US Citizen, Green Card Holder, or have a work visa (not a B1/B2 & Crew Visa), you do not owe US Taxes. Period. Work Visa residing the in the United States that is.

You first have to apply for a tax ID number (ITIN) by filing a W7. This will require you to MAIL IN your passport to the IRS office (copies will not be accepted). This is literally impossible for your line of work given you require your passport for day to day use and the turnover time (if the IRS doesn’t lose your passport in the process) is seven weeks.

Your company will lose this battle. Ignore the threat. There’s literally no company in the world pursuing this venture as it is entirely asinine and has zero precedence.

Now, I’m sure the IRS would gladly accept donations, but please move forward.

[Airbubba]

As I observed earlier:

Just ask any pilot if you want tax advice.

_________________________________

Unless you're paid in the US, it's hard to see how you could be taxed there. And if you're being taxed in your base jurisdiction (say HKG) you wouldn't be liable to pay tax again on the same earnings in some other jurisdiction.

As Airbubba says, these are both incredibly naive assumptions. The first is completely wrong (I was paid for several years in the UK but taxed in HK, for example). And the second assumes a comprehensive avoidance of double taxation agreement between the jurisdictions concerned (which is far from a given), and your citizenship not being one that taxes on that basis rather than on residence.

For some reason, Hong Kong has no double taxation treaty with the USA, even though it has treaties with many other countries.

You can be taxed pro-rata on how much working time you spend in country, as a non-resident.

I've never heard of any foreign airline employees having to pay taxes in the US. Or anywhere for that matter, other than their country of residence. They cannot be considered residents because they come on a D-1 or D-2 visa.

Unless you are a US Citizen, Green Card Holder, or have a work visa (not a B1/B2 & Crew Visa), you do not owe US Taxes. Period. Work Visa residing the in the United States that is.

If you are not US tax resident you dont pay tax UNLESS the IRS has changed their interpretation of the tax code or the tax code has been changed by Congress. It would be sensible to seek advice whether this has happened from a US CPA as opposed to taking advice, including mine, on Pprune

I know nothing about this, but page 13 of the document seems to suggest tax is due.......As I said in another post, this is an IRS issue, nothing to do with your employer, but you need advice from a US CPA not armchair accountants on Pprune

You've got to ask yourself one question: 'Do I feel lucky?' Well do ya, punk?

[EEngr]

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.

[Water pilot]

Since only the hours that you are paid for working in the United States count (I presume!) the amounts taxed by the US must be quite small. The standard deduction is $18,000.

If you are liable for those taxes on such a small income, then I would presume that you would also be eligible for low income assistance such as welfare and food stamps... :}

[Icelanta]

Hahaha,

what a joke.

Why would anyone, not linked to the USA , start paying tax to them and not see any benefit ?!
The IRS can kiss my hairy European Butt, and I can guarantee that NOBODY in my airline will even think about paying the US taxman even a dime for the time we spend on layover or overflying the USA.
I fly to over 50 countries a year. Imagine the tax I would have to pay if every country would he so moronic.
what about businessmen going for a meeting in the US? Would every person visiting the USA for business now have to file a tax return? Indeed, impossible and totally retarded.
if they insist, we will just refuse to operate any US-bound flight.
I strongly suggest CX crew to do the same.

[Water pilot]

Here is a link (https://www.irs.gov/pub/irs-pdf/p519.pdf) to an IRS pub that might shed some light on the subject. As a practical matter, if you reside in a country where the IRS would have any chance of collecting on US taxes, you probably have a tax treaty with the US that is reasonable. British subjects after Brexit, well, whatever...

Substantial Presence Test You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for calendar year 2018. To meet this test, you must be physically present in the United States on at least: 1. 31 days during 2018, and 2. 183 days during the 3-year period that includes 2018, 2017, and 2016, counting: a. All the days you were present in 2018, and b. 1/3 of the days you were present in 2017, and c. 1/6 of the days you were present in 2016.

Even if you meet the substantial presence test, you can be treated as a nonresident alien if you: • Are present in the United States for less than 183 days during the year, • Maintain a tax home in a foreign country during the year, and • Have a closer connection during the year to one foreign country in which you have a tax home than to the United States (unless you have a closer connection to two foreign countries, discussed next).

[marchino61]

Brexit does not affect UK tax treaties. They are not handled by the EU. Each nation negotiates its own treaties.