Various states are slowly coming out of COVID-19 quarantines. As commerce and life slowly return to normal, businesses are resuming operations and bringing employees back online. While some employees are fortunate to resume their life and never missed a paycheck, some businesses have closed forever, leaving employees stranded to navigate the post-pandemic world.
During the past several months, I have been informally surveying our accounting and payroll clients in hopes of assessing the economic impact of the pandemic on the luxury yacht/marine industry. While there has been a negative impact, I do not believe the economic contraction has affected the marine industry as badly as other segments of the U.S. economy. While there is reason to be optimistic about the future, this provides little consolation to crewmembers and maritime employees who have lost their jobs. As luxury yacht crewmembers attempt to acquire work where they can find it, the steps they take now can help alleviate additional stress when they’re filing their 2020 taxes.
While there has been a negative impact, I do not believe the economic contraction has affected the marine industry as badly as other segments of the U.S. economy.
Over the past several months, Congress has passed a number of measures to help alleviate the financial burden to taxpayers. In addition to extending the filing deadline for the 2019 income tax return, Congress has also extended the 2020 estimated tax payments that are normally due on a quarterly basis. While this may not affect crewmembers, it certainly has an impact on those whose taxes aren’t being withheld. If you’re working as a contractor or for a foreign-flagged vessel, you’ll need to be careful that you don’t get behind on your estimated tax payments. While the first and second quarter tax deadlines were extended, the remaining third and fourth quarter tax payments are still due on their original due dates, causing a compression of when the taxes are due.
Another trap faced by crew who have been out of work is that they may take freelance jobs while they are waiting on permanent positions to open up. While freelance contractor jobs can help bridge the gap, crew need to realize that if they’re working as a contractor on a U.S.-flagged or foreign-flagged vessel, they’ll likely not have taxes withheld from their salary and will likely receive a 1099 at the end of the year. If you’re working as a contractor and not having taxes withheld from your salary, carefully track your out-of-pocket business expenses associated with each job and put aside approximately 25 percent for taxes.
During the financial crisis of 2007/2008, many out-of-work crewmembers had trouble recovering when it came time to file their taxes. The trauma of being out of work sometimes causes individuals to put things on the back burner. If you find yourself in a new job or temporary job for which you are unsure about the tax consequences, call your accountant for a quick review.
This column originally ran in the August 2020 issue of Dockwalk.