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Foreign Crew, Foreign Flags and the IRS
S_ellicott
Posted: Tuesday, January 4, 2011 9:28 PM
Joined: 20/09/2010
Posts: 4


Having been quite unaware, or ignorant to the complications that were going to arise from accepting a job with my girlfriend on a FF Vessel, we agreed a salary with the owner and moved onboard. From my understanding, over the past couple of years the IRS have got wiser and now any crew earning money in the US are responsible for paying their own taxes, but how many captains are making their crew aware of this? Crew join a vessel, sign a contract if their lucky, give over their bank details and after a month money is in the bank. My boss made it clear to us that we would be responsible for paying our taxes and gave us advice on the best way to do this. So over the following month I spent many hours looking into our options worrying that paying tax might violate the terms and conditions of our B1/B2s and this is what I found. When the IRS clamped down last year on foreign crew they approached the payroll companies directly and demanded 20% on all salaries paid, so the payroll companies approached the owners who have to pick up the bill. There are some smaller payroll companies out there that havn't been approached yet, but I feel its only a matter of time. So does this mean that when you agree for example to a salary of 5k, you could lose up to 1k in tax? Not good news for those of us fortunate enough to have been tax free for the last few years! So how can you minimise the impact on your earnings? Set up a LLC (Limited Liability Company) Corporation. This means that you would be self employed, and invoice the boss each month in your corporations name. Here in the states, the tax breaks for small corporations are great, as small corps account for a large percentage of the economy, so you pay yourself a salary into your offshore bank accounts from the corporate account here in the states. Bear in mind that anything like clothes, transportation, phones etc should be paid for by the company, not your salary as these should be tax deductable so you need only take a small salary and thus fall into a lowest tax category. Having a corporation here then means that you can then apply for an investors visa, and not have to leave the states for a couple of years and have a good chance of being accepted If I'm honest, I did feel out of my depth as advice I was recieving was rarely the same from person to person so I went to a maritime attorney and accountant and had him explain it to me, he was striaght upfront and honest with me but made it sound so complicated that I just asked him to do it all for me. This obviously has a significant cost, but I think its worth it for the peace of mind that your doing everything legitamately. What I have written here is my understanding, if I am wrong about things then please correct me! The more advice given the better. I hope this helps someone out there!
rodsteel
Posted: Wednesday, January 5, 2011 1:20 AM
Joined: 25/06/2009
Posts: 275


Hi,

 

Where is the home port of your FF vessel (i.e., does it spend less than an agregate of about 180 days in US waters each year)?

 

Also, since you seem to have entered the US on the B1 portion of your visa, does the vessel leave and re-enter US waters often enough to prevent your B1/I-94 from expiring (usually under six months)?

 

Rod

 

P.S. By the way, as I understand it, the IRS and ICE are different (and usually unrelated) entities.


Anonymous
Posted: Friday, January 7, 2011 9:33 PM
foreign crew on foreign flag paying taxes? unheard of and very in accurate. First of all for an individaul to pay taxes in america you need to have a social security number which makes you a resident or green card holder or a tax id number which you may only obtain if you have a social security number. if you have a social security number you do not need a B1 B2 visa as you are a resident of the united states. Anyone in yachting that works on a foreign flag vessel that is visiting america and has a foreign passport needs to have a B1B2 visa regardless of the visa waiver program with their/your country. You can only open an LLC. in america if you have a social security number or a tax id number and non of those two numbers will be issued to you if you have no way of proving you are either a u.s citizen or a resident (green card holder).If your boss sponsors you through employment you may obtain a work permit which in turn earns you a tax i.d number so that they may collect taxes and in the long run a a social security number. Think about this , you are foreign so you probably pay taxes in the country that hosts you and provides you ith a positive i.d / travel document , the yacht you work on is foreign flagged which means it is visiting any territory that is not identified with the flag it flies so the rules that apply in local government that are not of your vessels flag or your naturalized country of origin do not apply . you are by law working on foreign soil regardless of vessels location geographically except at the home port of registration. So it is Highly suspicious that your American boss demand you pay taxes in America to that you or the vessel you work on are not linked to by law or be birth or naturalization thats why they gave you a "visiting " visa.If you are paying taxes then you should very well go ahead and demand a tax id number and a social security number because by law you are abiding by the common mans rules and should be granted the full benefits that come with it so you should be allowed to establish credit history , and get loans on anything you want to buy and eventually receive social security benefits when you retire regardless of where you will be at the time when you are due for it . You should also be allowed to work on u.s flagged vessels too .If you are foreign on a foreign flag vessel you should NOT be paying taxes in america. What if the vessel leave and goes to Antigua , should you start paying taxes there too? if so then i suppose we should pay taxes in every country the vessel visits.If your source of payment is a u.s corporation then you are working in the u.s by law and you should pay taxes and be granted all the benefits that come along with that. Talk to your boss and clarify where your salary is coming from otherwise i think someone somewhere is scheming off the top on your cheese cake and whispering little something in your ear to make believe.(By the in tune "foreign sailor")
spinach
Posted: Friday, January 7, 2011 10:07 PM
Joined: 16/06/2008
Posts: 5


Home > Green Card > Green Card Through a Job > Green Card Through Investment Printer Friendly Green Card Through Investment Entrepreneurs (and their spouses and unmarried children under 21) who make an investment in a commercial enterprise in the United States and who plan to create or preserve ten permanent full time jobs for qualified United States workers, are eligible to apply for a green card (permanent residence). Up to 10,000 visas may be authorized each fiscal year for eligible entrepreneurs. You must invest $1,000,000, or at least $500,000 in a targeted employment area (high unemployment or rural area). In return, USCIS may grant conditional permanent residence to the individual. For more information, see Section 203(b)(5) of the Immigration and Nationality Act (INA) and 8 CFR 204.6 (see the “INA” link to the right). Eligibility Criteria You may be eligible to receive permanent residence based on investment if: You have an approved Form I-526, Immigrant Petition by Alien Entrepreneur You are admissible to the United States An immigrant visa is immediately available Application Process If You Are Living Outside the United States You can become a permanent resident through consular processing if you live outside the United States. Consular processing is when USCIS works with the Department of State to issue a visa on an approved Form I-526, Immigrant Petition by Alien Entrepreneur, petition when a visa is available. For more information on consular processing, see the “Consular Processing” link to the left under “Green Card Processes & Procedures.” If You Are Living in the United States You can become a conditional permanent resident through adjustment of status if you live inside the United States. Once the Form I-526 is approved and a visa number is available, you can apply for conditional permanent residence on Form I-485, Application to Register Permanent Residence or Adjust Status. For more information see the “Visa Availability & Priority Dates” and “Adjustment of Status” links to the left under “Green Card Processes & Procedures.” Supporting Evidence for Form I-485 You should submit the following evidence/documentation with your application: Two passport-style photos Form G-325A, Biographic Information, if you are between 14 and 79 years of age Copy of government issued photo identification Copy of birth certificate Copy of passport page with nonimmigrant visa (if applicable) Copy of passport page with admission (entry) or parole stamp (if applicable) Form I-94, Arrival/ Departure Record (if applicable)
Anonymous
Posted: Friday, January 7, 2011 10:23 PM
Non-Resident Alien What Does Non-Resident Alien Mean? A non-U.S. citizen who doesn't pass the green card test or the substantial presence test. If a non-citizen currently has a green card or has had a green card in the past calender year, he or she would pass the green card test and would be classified as a resident alien. If the individual has resided in the U.S. for more than 31 days in the current year and has resided in the U.S. for more than 183 days over a three-year period, including the current year, he or she would pass the substantial presence test and also be classified as a resident alien. Investopedia explains Non-Resident Alien Resident aliens are taxed on all earned income as if they were U.S. citizens, but a non-resident alien is not taxed in the same way. For a non-resident alien, only income that is generated from U.S. sources, excluding certain investments such as stocks, is subject to taxation. For example, if you live in England and own a company that operates in the U.S., but you have not been to the U.S. for five years and don't have a green card (a non-resident alien), the income generated by the business will be subject to U.S. tax. Dividends are taxed at 30% for every non-resident alien, while capital gains are not subject to U.S. tax.
Anonymous
Posted: Friday, January 7, 2011 10:37 PM
Q:Taxes Return for B1/B2 Visa Holders Asked by Kotaminyak On May 06, 2008 Hi, I was a B1/B2 visa for the last three years and meet the substantial presence test if you take into account the last three years. I have always stayed in the U.S. for around 25 days at a time but never more and I visit the US every other month as I am employed overseas with a Thai based company. My question is - do I have to file a U.S. tax return? No Yes Is this helpful?AtlantaTaxExpert 1992 Reputation EXPERT Senior Tax Expert, Atlanta, Georgia If your total stay in the U.S. is less than 183 days AND your income is from a foreign company AND the foreign company does not have a fixed base in the U.S., then your income is EXEMPT from U.S. income taxes and you do NOT have to file a U.S. tax return.
Anonymous
Posted: Friday, January 7, 2011 10:38 PM
No Yes Is this helpful?AtlantaTaxExpert 1992 Reputation EXPERT Senior Tax Expert, Atlanta, Georgia If your total stay in the U.S. is less than 183 days AND your income is from a foreign company AND the foreign company does not have a fixed base in the U.S., then your income is EXEMPT from U.S. income taxes and you do NOT have to file a U.S. tax return.
spinach
Posted: Friday, January 7, 2011 10:50 PM
Joined: 16/06/2008
Posts: 5


the above example should answer your questions... for you to even think of opening a llc here you need to become a resident first , which means you need to adjust your status with the immigration from b1 b2 to resident then proceed to get the lovely numbers that will allow uncle sam to take your money gracefully without the magi numbers or a solid link on paper tying your source of income to the land of opportunity you should NOT part with the mighty green pieces of paper that you wielded a chamois so hard for , if you somehow open a llc and start paying taxes while you still hold a b1 b2 in your passport then be prepared to be flagged flogged and questioned painfully every time you clear in to the u.s as it will show up every time your name is typed on a computer and when it does show you own a corporation in the u.s and your papers show you are a visitor (b1 b2 you will be tongue tied for a decent explanation , the result will be an immediate cancellation of your visa , an investigation there after of the supposed llc , and if you have used it to accrue property of any kind e.g cars , houses etc it can be confiscated and auctioned because you "illegally" had a business in the u.s not to mention the end of your career in yachting in the north eastern part on the world excluding canada......Be careful fella your flirting with alot that seems like a little
Kate Lardy
Posted: Saturday, January 8, 2011 12:05 AM
Joined: 24/07/2008
Posts: 22


To the person who posted all the above posts: a non-resident alien is a student, an investor, a H1B holder (sponsored employee), etc, all of who have to pay U.S. taxes and have social security numbers or TINs. You don't have to have a greencard to get a SS number or pay taxes. Non-residents live in the U.S., but are considered non-resident, because they don't have greencards.


sencho
Posted: Saturday, January 8, 2011 4:21 PM
Joined: 29/12/2010
Posts: 8


"foreign crew on foreign flag paying taxes? unheard of and very in accurate. First of all for an individaul to pay taxes in america you need to have a social security number which makes you a resident or green card holder or a tax id number which you may only obtain if you have a social security number." Anonymous... you are completely and utterly incorrect.
Anonymous
Posted: Saturday, January 8, 2011 6:01 PM
ok go get one then and good luck
spinach
Posted: Saturday, January 8, 2011 6:12 PM
Joined: 16/06/2008
Posts: 5


ok... bottom line is you are foreign , with a b1b2 , for you to pay taxes you do not need the green card , kate is right but you do need a tax id number or a social security number... try obtaining any of the two using a b1 b2 and if you get it then you are in business!.I was only trying to speak from experience , not guessing.... if you try to have a business here and you dont follow protocol in the paper work side you will get flagged like i did and its hard to fix it if your career is still on track. so good luck buddy and be caferul
rodsteel
Posted: Saturday, January 8, 2011 10:21 PM
Joined: 25/06/2009
Posts: 275


To all,

 

As I understand it (and alluded to above) there are two issues involved in the situation as described.

 

First is income and social security taxes due on wages paid (usually to US residents) by a US entity in US waters. The second, and more important, is the immigration status of the foreign crew (US citizens and green-card permanent residents are not considered to be foreign crew by ICE). If the foreign crew are not legitimate residents of the US (i.e., in possession of one of several types of work visas) then they are not permitted to receive wages paid by a US entity in US waters.

 

However, foreign crew who have entered the US on the crew list of a foreign flagged vessel (usually via a B1 business visitor's visa and associated I-94 entry document) are permitted to be paid wages by a foreign entity while in US waters. In this case, unless the foreign crew stay in US waters for longer than 180 odd days, I believe you will find that no US taxes are due from the foreign crew (i.e., they do not qualify as US tax residents). The length of stay in US waters by the foreign crew is governed by the I-94 (which is usually less than 180 days unless a special extension has been applied for and granted).

 

It is not clear from the original description of the issue(s) which of the above applies.

 

Rod

 

P.S. In the past, I had need to file a joint 1040 with a non-resident spouse. All I had to do was apply for (and was granted) on-line an ITIN in the spouses name (no visa required).


S_ellicott
Posted: Thursday, February 3, 2011 11:36 PM
Joined: 20/09/2010
Posts: 4


Just to let you all know I now have my LLC, federal I.D number and corporate bank account so whoever the know it all anonymous poster who plagues these forums can hush up! Rod steel's last post was totally fact based. There is a slim chance of getting caught if you avoid due taxes, but its not worth risking your careers!
Anonymous
Posted: Friday, February 4, 2011 2:14 AM
Most crew transit between the USA and Europe and are never anywhere long enough to warrant paying tax in the places they cruise. It sounds very much like your trying to stay in the United States and hoping for some kind of resident status by paying taxes in the USA? If your boat is based in the USA your boss should be employing Americans. The reason your boss wants you to pay your own taxes is fairly simple, he does not want to be responsible for you. I also sail on foreign flagged yachts, pay taxes in my homeland and don’t overcomplicate my life by trying to pay tax in every port I visit. The USA has dual tax agreements with other countries and what you should be doing is sending your salary back home and paying withholding taxes every quarter and then completing your tax forms every financial year. To diminish tax liability in your homeland you must be a legal resident of another country and pay taxes in that country, visiting the USA for extended periods on a B1B2 is not going to qualify you as a resident in the USA . Paying tax back home works for me, I get the majority of my money back each year and don’t run into problems anywhere because I am legitimate. What your trying to do is far too complicated and I think your maritime attorney is telling you what you wish to hear because you intend living and working in a country your not meant to be working and living in. As for the payroll companies you confirmed the tax responsibility is the domain of your employer and how you persuaded yourself to pay taxes and register as a company in the USA is beyond me? Again are you trying to be an American and are you trying to coach others in the art of living in working in the USA illegitimately?
Anonymous
Posted: Wednesday, February 16, 2011 5:08 PM
Its quite simple.... any crew that spend more than 183 days a year in US waters are responsible for paying tax to the US government.
Anonymous
Posted: Wednesday, January 8, 2014 9:31 PM

Very interesting read!! I was just asked whether I had an I-94 and whether I belonged to an LLC. This was by an employer on a Foreign Flagged vessel which doesn't seem to leave the US. Apparently all the crew have an LLC and of course the I-94.

This forum helped a lot, however I think it is going to be a whole easier working on board a vessel which leaves the States from time to time as opposed to working on one which just cruises the US coastline.

Any thoughts on this matter...


BandB
Posted: Saturday, January 11, 2014 6:49 PM
Joined: 15/12/2013
Posts: 36


While every specific situation must be reviewed carefully to make any final determination, I'm going to make the principles behind it very simple:

If you're a resident of the US (Either citizen or green card), then you must pay taxes on all your income. Now, you may get credit for foreign taxes paid. 

If you're not a resident, you must pay taxes on any income earned in the US. 


Anonymous
Posted: Monday, January 13, 2014 12:27 PM
As far as I know foreign crew has to pay the income tax after the 180 days, but the ff vessels cruising permit will be expired after 180 days (unless the ff vessel is duty payed)  it will probably head to a foreign port anyway..also when I called a tax adviser about it your allowed to make an x amount before your taxable ( I recall up to 90K) I'm in the situation as described above and my green card is pending. To me it seems hard to actually pay the tax yourself without a social or tax I.D. Unless the us yacht owner deducts the taxes...
 
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