Tax question

[tomtom]

Guys,

Not sure if I should post this here or not but I figured that anyone with the info would be lurking in here sooner or later. Worked over seas this year and looking for a tax attorney that has experence in international tax for some help this year. If you have any info please PM me.

Tom

[Dutch8654]

Originally posted by tomtom
Guys,

Not sure if I should post this here or not but I figured that anyone with the info would be lurking in here sooner or later. Worked over seas this year and looking for a tax attorney that has experence in international tax for some help this year. If you have any info please PM me.

Tom

A good CPA should be all you need unless your in trouble. You can look at the required forms on irs.gov that will apply.

[dogman]

I posted something about dealing with taxes here:

http://www.socnetcentral.com/vb/showthread.php?s=&threadid=41214

If you worked overlapping tax years (e.g., half of 03 and half of 04), there are some caveats to the $80K tax free deal.

[tomtom]

Thanks guys.

Tom

[mike792]

The only thing I can add is the following: This subject has been beaten to death and resurrected time and time again. Dutch said it right. Get a good CPA. And I mean a good one. I have been working overseas since 98. I haven't paid any federal income taxes during any of those years. Talk to the Petroleum workers that work 28 days on and 28 days off. They still don't pay any tax.
Find out who their CPAs are and hire that individual. They are worth their weight in gold.

ICs don't forget self employment tax. (AKA Social Security etc) companies that do not deduct the FICA taxes will become your responsibility to the tune of 15% I think.
I never worry about that stuff, that is what I pay my CPA for.

(Side note)
Tax evasion is not an extraditable offense if you live in Costa Rica.
:D

[RAT]

Originally posted by mike792
15% I think.
I never worry about that stuff, that is what I pay my CPA for.

(Side note)
Tax evasion is not an extraditable offense if you live in Costa Rica.
:D

Mike,

Can be up to 38% for selfemployment. A good CPA can tell you how to do it. Either way you gonna pay. HAHAHAHA

RAT OUT!!!

[mike792]

RAT Hi thanks for the bad news :D maybe I should move back to Costa Rica.

[LRS Guy]

Does anyone have a good CPA in that they would recommand in the Mid-west???

[doitforjonny]

in southern california? san diego area?
out

[MixedLoad]

CA, Sacramento area. Any good name you would like to share?

[Jules]

I've been lurking for quite some time and wanted to first of all say hello. I've gained a wealth of information from many on the board and hope someone will be able to help with my question.

I left my previous life to join the contracting world about eight months ago and came home for a couple of weeks to put my taxes, among other things in order. My dilemma is finding a qualified accountant. I live in Indiana and can travel anywhere in the state or Chicago if necessary. The man I planned on seeing was diagnosed with brain cancer and my previous accountant was industry specific. Any recommendations or advice would be greatly appreciated. Thanks in advance for your help!

Jules

edited to add- Google gave me this site with options for Cali residents.

http://www.expatexchange.com/rg.cfm?resourceID=904&networkid=274&guide=finance

[doitforjonny]

(twiddling fingers like homer over a candy bar)
check this out...id heard rumor of it but i just got in hard copy. i dont have a link for you guys but i do have reference numbers.
it is a memo from dep of treasury, control #SB/SE 2004-60......expires 05/31/2005....dated june 28 2004

in it it states civvies and military in qualified combat zones (QCZ) salaries are tax free. they are defined as

civilian or military personnel who are:
-in direct support of a combat zone military initiative and
-physically located in combat area
or
mil pers not located in designated combat area but are
-in direct support QCZ initiative
-receive imminent danger
and(this is where it gets VERY VERY interesting)
spouses and dependants of QCZ personnell above

Alert: W 04032 dated 11/14/2003

members of Coalition Provisional Authority in Iraq qualify for the extensions in part of 7508(a) provides in part that time spent in combat zone (plus 180 days) by individual serving in support of armed forces will....blah blah

turns out (he just walked in the room) i have a buddy with soft copy who will email it to me. if you want it pm me with email addy
Happy christmas Merry new year
LATE

[Jules]

PM sent thanks for the info!

[landshark]

PM inbound

[Flatfoot75]

Originally posted by doitforjonny
(twiddling fingers like homer over a candy bar)
check this out...id heard rumor of it but i just got in hard copy. i dont have a link for you guys but i do have reference numbers.
it is a memo from dep of treasury, control #SB/SE 2004-60......expires 05/31/2005....dated june 28 2004

in it it states civvies and military in qualified combat zones (QCZ) salaries are tax free. they are defined as

civilian or military personnel who are:
-in direct support of a combat zone military initiative and
-physically located in combat area
or
mil pers not located in designated combat area but are
-in direct support QCZ initiative
-receive imminent danger
and(this is where it gets VERY VERY interesting)
spouses and dependants of QCZ personnell above

Alert: W 04032 dated 11/14/2003

members of Coalition Provisional Authority in Iraq qualify for the extensions in part of 7508(a) provides in part that time spent in combat zone (plus 180 days) by individual serving in support of armed forces will....blah blah

turns out (he just walked in the room) i have a buddy with soft copy who will email it to me. if you want it pm me with email addy
Happy christmas Merry new year
LATE

Pm sent. Thanks!

[Nousdefions794]

PM inbound. Thanks for the info.

[doitforjonny]

ccg,10thvet,tomtom
i am not savvy enough to attach files to pm's
?help?

[RAT]

FYI people.

Combat Zones (http://www.irs.gov/newsroom/article/0,,id=108331,00.html)

Remember you are not in the military. This is not like getting a combat patch or ribbion. All hostilites for the US and combat ended Apr. 20, 2003 or sometime around then. OIF to OEF.

An I.C. is the same as Halliburton. You fall under the same regs.

Contractor work in Iraq (http://www.irs.gov/irb/2003-32_IRB/ar15.html)

Foreign Earned Income Exclusion — What Qualifies? (http://www.irs.gov/taxtopics/tc855.html)

People. I keep telling you all to watch this.

You are still going to pay self-employment TAX. You may not pay income tax till you move the money into your personal account.

Like I said they are going to get you one way or the other.

If you have a CPA who knows the rules then better for you.

RAT OUT!!!

[Nousdefions794]

doitforjonny,

Thanks for the info.

I hope that the memo works, unfortunately all I read is that we are in fact deployed to a "Qualified Combat Zone" and thus are eligble for Section 7508(a)(1), which is just a postponement or extension. Below is some info from the IRS. I hope that I'm wrong.

Section 7508(a)(1) permits the postponement of certain time-sensitive acts for individuals serving in support of the Armed Forces in a designated combat zone. In the event of service in a combat zone, a number of acts are postponed. Activities specifically mentioned include the filing of tax returns, the payment of income, estate, or gift taxes (except employment and withholding taxes), tax claims filings or bringing suits for credits or refunds, filing any petition with the U.S. Tax Court, making a qualified retirement contribution to an IRA, or performing any other act listed in Revenue Procedure 2002-71. No penalties or interest will be imposed for failure to file a return or pay taxes during the extension period. Detailed information can be obtained by consulting Publication 3 Armed Forces’ Tax Guide (2002 Returns). The Guide can be obtained by contacting the IRS or from the IRS website, www.irs.gov.

This basic postponement period is for the period in the combat zone plus 180 days. If a person is injured from service in the combat zone, the deadline would be extended from the last day of any continuous qualified hospitalization, if that period is longer than the 180 day period in the preceding sentence. In addition to the 180 days, the deadline is extended by the number of days that were left to take action with the IRS when a person entered a combat zone.

[RAT]

Nous,

That is what I read as well.

If I remember right... The end of combat was sometime in April 2003. You add 180 days puts you around Dec 2003 for extentions.

I will keep saying it: Get a CPA or a Tax Attorney.

I would hate to see some one get nailed for shit we post here.

Unless one of us is a CPA.

RAT OUT!!!

[JAK]

I am not a CPA, but I am a CFP (certified financial planner) and have an MSF (Masters of Science in Finance). There is one thing that every IC can do to limit his tax liability and that's get a SEP IRA (Self Employment IRA). These are contributed from pre-tax dollars, and as a contractor this is allowed. This is not allowed if you are a full time employee, so verify your status if you do not know for certain, and some people don't. If your employer takes out taxes, you are likely a full time employee. If you get a 1099 at the end of the year instead of a W2, you are a contractor. Sounds simple but you would be surprised how many people are actually unsure of your status.

You can deposit up to 41K in these (SEP IRA's) per year (Up to 25% of your actual compensation), and you will have until April 15th to do so.

If you made 175K, you get the first 80K tax free if you were out of the country over 330 for the calendar year, then you can also get an additional 41K added to that for a total of 121K tax free. You will only have a taxable income of 54K from the original 175K. From here you can take the standard deduction or itemize. My itemized deductions this year were 22.5K, this would leave me with a taxable income of 31.5K.

Again, contact a CPA to assist you in setting up the above. It's pretty simple and turbo tax can do most of it if you understand what you are doing. For for setting up the self-employment IRA contact fidelity or another financial institution.

A word of caution for those seeking a CPA or financial planner, get one that only works on an hourly rate!! If you get a fee based planner, there is a good chance he is only going to run up fees by selling you products you don't need or want. Hourly planners normally have a ton of clients so they have no real reason to play with anyones accounts and make recommendations that get them mucho commissions.

Hope this helps someone.

Stay Safe -

JAK

[RAT]

JAK,

Thanks for the info. Very soild.... Stuff.

RAT OUT!!!

[Silverbullet]

Good advice all around.

Get a good CPA.

Save every reciept. As an IC you have more latitude to legally deduct expenses. Cell service, interent, equipment, etc...

You should also be able to deduct training you took to help you remain current in skills needed to work in your field.

Don't be shy about submitting expenses for deductions. Let your CPA advise you on what is or isn't going to fly.

The IRS isn't the big boggyman most make them out to be. They are just enforcing the piss poor tax code. Don't be afraid to submit for every deduction you can legally defend. It's your right.

Get a good CPA. You're writing his/her costs off so don't hire a guy that's cheap with no case history.

The tax code sucks but if used right it is also your friend.

[Massgrunt]

Question: If I go back to the states for independent training related to my job, will this screw me on the 330 day rule, or is it an exception?

[landshark]

Hey Mass,

As you know i'm not a Tax Expert. But have read IRS Pub 54 you would be concerned with Physical Presence Test starting on page 14 and probably should also read page 18 -20 Foreign Earned Income Exclusion.

It is pretty clear for the 330 you have to be physically pressent in a foreign country. There are a bunch of rules about travel etc for example and a something i was looking at doing was a cruise for my R&R, Well all the time spent in international waters does not count towards you 330 days because i would not be present in a foreign country. Here is the Example they gie in the publication.

Example 2. You leave Norway by ship at 10:00 p.m. on July 6 and arrive in Portugal at 6:00 a.m. on July 8. Since your travel is not within a foreign country or countries and the trip takes more than 24 hours, you lose as full days July 6, 7, and 8. If you remain in Portugal, your next full day in a foreign country is July 9.

Take it for what it's worth, but I will say that when i went home on my last R&R I traveled on CAC card and orders the whole way including US Customs and there was no government record of me coming in or out, No scanned or stamped passport, no entering my name into a computer etc. But this is shakey. I've also heard of the fly into canada and drive into the states thing. If the govt wanted to get picky they could see that i purchased tickets to the states and also used my atm card blah blah. Me and my Orwellian paranoia kicking in. I'm choosing to play it safe and go to eat some authentic mexican food.

Email me if you want me to shoot you a copy of Pub 54

[doitforjonny]

if you read the fine print on the overseas exclusion definition, the 330 day presence test is to establish oconus residency. once residency is established, it specifically mentions circumstances as vacation and follow on training once resdidency has been established as permissible, within reason.

how they define 'reasonable' i dont know.

someone on this thread has the actual nomenclature. lemme see if i can scrounge it up.

also i am not a professional individual whose job it is to know this shit, so dont take anything mentioned here as gospel and DO go seek good legal or tax planning counsel from a CPA or tax attorney specializing in overseas contracting

[Massgrunt]

My dad's a CPA, he's looking into it but it's far outside his normal area. Thanks guys.

[dogman]

I believe it is 330 days in a 365 day period. The law seems to allow for the fact you may come home on vacation, emergency, business, etc.

[landshark]

if you read the fine print on the overseas exclusion definition, the 330 day presence test is to establish oconus residency. once residency is established, it specifically mentions circumstances as vacation and follow on training once resdidency has been established as permissible, within reason.

I think your mixing you're terms a bit, From my understanding the physical presence test does not establish residency it establishes that you were physicaly present in a foreign country and qualifies you as having a tax home in a foreign country. It is an alternative to bona fide residency.

Pub 54 does't say anywhere that i have read that you must qualify for the physical presence test before you can return to the US for any reason. You can come back to the states at any time during the 12 month period as long as you are present in a foreign country for 330 days during those 12 consecutive months.

Now I could be wrong and it sure as hell wouldn't be the first time, but I can't find the "fine print" you mentioned can you point to the page it's on?

[Xdeth]

There is no exclusion other then the foriegn earned income exclusion, anything else is just a reference to the very small time frame in 2003. It's not a big deal unless you get caught.

[Kalbo]

Some great advice here, keeping receipts, organizing records, etc.. Last tax season, I did some volunteer work with VITA/TCE (Volunteer Income Tax Assistance/Tax Counseling for the Elderly). Some volunteers are certified by the IRS to complete Military returns. This is a free service and for more info follow the link below and look under "Military personnel and their families get free tax help!"

http://www.irs.gov/individuals/article/0,,id=119845,00.html

Keeping good records and not waiting to the last moment will make everything go smoother.

Hope this helps,

Kalbo

[Silverbullet]

Kalbo,

Good to see you here. Hope all is going well.

[Kalbo]

Silverbullet,

PM inbound.

Kalbo

[Massgrunt]

Okay, I'm not an accountant, and I'm repeating this, so obviously check things out yourself before making any decisions.

I have been looking into the Foreign Earned Income Exclusion deal. I needed to know if travel to the US for professional or educational purposes was exempt from the time limits. According to my CPA, it's not, but the tax liability is pro-rated, so it's not like you're going straight to the max. So, if I'm in the country x number of days past 330, then I'm liable at the higher rate for those days only, not for the whole year.

I hope that's clear enough to be useful if anyone was asking the same question. Of course verify this on your own before relying on it. Because if I'm wrong, good luck finding me. :D

[doitforjonny]

landshark

if i recall correctly (again i am no expert and this is from memory) and it does stick out because i went through the definition earlier this year of when which days count and all that as i was cutting it close last fiscal year and blew my 330,

i noticed that in the FIRST tax year where you are trying to establish ocunus residency(you are prolly right this is the wrong technical term but for all intents it does get the idea across) you are allowed 35 days in america, regardless of reason. it is a straight up numbers game.

in following years after you have already filed and established 'residency' you are allowed to come home for vacation and follow on job training in excess of 35 days as long as it is ' reasonable'. again who the fuck knows how irs determines reasonable.also, i remember coming to this conclusion not being spelled out but as a necessary function of the way in which the document is written

if in the first year you blow the 330 tax exclusion, the exclusion is able to be pro rated, as massgrunt has said. however, and this is the question for the cpa's, if you DO you use that pro rate, do you still get to claim every expense overseas as a tax right off for a business expense?

again, CPA UP!!

i am by no means standing by any or all of the terms used in the preceding paragraphs as anything other than a layperson recalling from memory. thats the cpas job to know the right term. so yes you are right i am misusing my terms , and i apologize. i will endeavor to bone up on my tax taxonomy in the future( LAUGHING)

stay safe all

LATE

[Massgrunt]

That's good news, because I will have over a year overseas at that point. No idea about deducting every expense overseas. FWIW, my dad has never mentioned being able to write off every little thing. I know guys that do this, but my impression is that it's one of those things, "it's not a crime if you don't get caught". I personally wouldn't do it, unless I know for sure it's legit.

[doitforjonny]

it appeared as a pipe dream to me, one of those either choose the tax exclusion or choose the right off deal, and if you chose to use both well....

as i no longer have the laptop i saved it on i cant reference it, though....

[Massgrunt]

Another one I need to look into, the rumor that you're authorized x number of dollars as per diem, and you can deduct the difference on your return.

It would be nice if companies would give you a primer on this stuff, but of course it's your money and your problem. I'd say I'm better informed than most people I've talked to, which is frightening considering how little I know.