Anyone that has been working in the yachting industry for more than ten years has probably noticed that the days of receiving foreign wire transfers with no W-2 or 1099 is becoming less frequent. Many crewmembers are now part of a formal payroll, regardless of the flag of the vessel. If you are one of these crewmembers and you do not have a complicated tax situation, you might be surprised how easy it is to prepare your own tax return.
The Internal Revenue Service announced that it will be offering a free, secure, electronic filing option for eligible taxpayers. This will be a pilot program offered to a select number of states, including Florida, eligible to participate. At this time, the free service will only be eligible for W-2 filers and those taxpayers with social security, unemployment compensation, and interest income of $1,500 or less. More information regarding this pilot program can be found at irs.gov.
For those taxpayers not eligible for the free filing version there are a number of alternative over-the-counter software options. Tax software programs are designed to help the average taxpayer accurately prepare and file state and federal income tax returns. If you need extra support, almost all tax software programs are equipped with tools to help you answer common questions. Some tax prep solutions may be better than others, depending on your individual situation. For example, some may find that TurboTax is better for stock investors as opposed to TaxSlayer, which may be preferred by self-employed individuals.
Navigation is simple on some of these software programs, and many will import data from a previous year’s tax return. Whenever you self-prepare a tax return, it is important that you carefully review the prior year’s return as many taxpayers have data that carries over from year to year. It is also important to keep in mind that if you have a basic situation with a single W-2, you might be eligible for a free filing. Free filing solutions can be found on the IRS website, irs.gov.
Although more maritime professionals are being treated as regular employees, there are many more with complicated tax scenarios and these situations may still require the assistance of a professional tax preparer. There are still many crew being paid from foreign corporations with no W-2 or 1099 and many crewmembers are involved in cross-border transactions that may require the filing of complicated information returns that are not always available on some tax prep solutions.
Please note we are not endorsing any particular software solution. The purpose of this column is to bring attention to some of the options available to taxpayers. If at any time you are confronted with a situation that does not lend itself to an easy filing, we recommend you do your research for the appropriate solution.
This article was originally published in the March 2024 issue of Dockwalk.