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  #21  
Old 17 February 2018, 14:30
leopardprey's Avatar
leopardprey leopardprey is offline
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Join Date: Dec 2005
Location: Indiana
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Quote:
Originally Posted by jerome View Post
I hate paying quarterly estimated taxes but you have to do it! I know an American Green Card holder who thought he didn't have to pay his U.S. taxes because he worked OCONUS for a non-American company and he technically was not an American citizen. Uncle Sam thought otherwise and delivered a nice fat tax bill.
You are still liable for federal income tax and state taxes, but you can opt out of social security taxes, if working overseas for a non-USA based company. I have worked overseas for several non-USA based companies/organizations. But use to be based on honor system as well, unless you transfered your money back to the USA. Now many of the foreign banks have agreements with USA to report. And sadly cause of this there are some foreign banks that will not let US citizens open accounts anymore. Which is a PITA if you are working/ living overseas, getting paid by the host nation, company in the host nation, or a third non-USA nation.
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  #22  
Old 17 February 2018, 15:36
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bobofthedesert bobofthedesert is offline
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Is SOC still paying the Iraqi taxes for their guys, whereas TC is not? In addition to another $20-25@day base rate?
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  #23  
Old 17 February 2018, 18:28
Rockville Rockville is offline
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Join Date: Feb 2012
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see
https://www.irs.gov/individuals/inte...-living-abroad

https://www.irs.gov/individuals/inte...-organizations

Wages Paid to Employees of Foreign Governments
If you are an employee of a foreign government (including foreign municipalities) your wages are exempt from U.S. income tax by:

A provision in a tax treaty or consular convention between the United States and their country, or
Meeting the requirements of U.S. tax law
Employees of international organizations can exempt their wages from U.S. income tax either by a provision in the international agreement creating the international organization, or by meeting the requirements of U.S. tax law.

This exemption applies only to pay received for services performed for a foreign government or international organization. Other U.S. income received by persons who qualify for this exemption may be fully taxable or given favorable treatment under an applicable tax treaty provision.

Exemption Under Tax Treaty
If you are from a country that has a tax treaty with the United States, you should first look at the treaty to see if there is a provision that exempts your income. The income of U.S. citizens and resident aliens working for foreign governments usually is not exempt. However, in a few instances, the income of a U.S. citizen with dual citizenship may qualify. Often the exemption is limited to the income of persons who also are nationals of the foreign country involved.

Exemption Under U.S. Tax Law
Employees of foreign governments who do not qualify under a tax treaty provision and employees of international organizations may qualify for exemption by meeting the following requirements of U.S. tax law:

Employees of Foreign Governments
If you are not a U.S. citizen, or if you are a U.S. citizen but also a citizen of the Philippines, and you work for a foreign government in the United States, your foreign government salary is exempt from U.S. tax if you perform services similar to those performed by U.S. government employees in that foreign country and that foreign government grants an equivalent exemption to U.S. government employees.
To qualify for the exemption under U.S. tax law, either the U.S. Department of State must certify that you perform services similar to those performed by employees of the government of the United States in foreign countries and that your foreign government employer grants an equivalent exemption to U.S. government employees performing similar services in its country or you must establish those facts. However, see the Aliens Who Keep Immigrant Status section below for a special rule that may affect your qualification for this exemption.
2. Employees of international organizations
If you work for an international organization in the United States and you are not a U.S. citizen (or you are a U.S. citizen but are also a citizen of the Philippines), your salary from that organization is exempt from U.S. tax. However, see the Aliens Who Keep Immigrant Status section below for a special rule that may affect your qualification for this exemption.
An international organization is an organization designated by the President of the United States through Executive Order to qualify for the privileges, exemptions, and immunities provided in the International Organizations Immunities Act.
If you are claiming this exemption, you should know the number of the Executive Order covering the international organization and should have some written evidence of your acceptance or designation by the Secretary of State.
This exemption is denied when, because the Secretary of State determines your presence in the United States is no longer desirable, you leave the United States (or after a reasonable time allowed for leaving the United States).
This exemption is also denied when a foreign country does not allow similar exemptions to U.S. citizens. Then the Secretary of State can withdraw the privileges, exemptions, and immunities from the nationals of that foreign country.
CAUTION. The exemption under U.S. tax law applies only to current employees and not to former employees. Pensions received by former employees living in the U.S. do not qualify for the exemption under U.S. tax law.
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  #24  
Old 17 February 2018, 22:13
MedicFL MedicFL is offline
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Join Date: Dec 2014
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Posts: 35
Quote:
Originally Posted by bobofthedesert View Post
Is SOC still paying the Iraqi taxes for their guys, whereas TC is not? In addition to another $20-25@day base rate?
No SOC is not paying taxes.. But they do give you a completion bonus..
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  #25  
Old 17 February 2018, 23:13
pm410 pm410 is offline
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Join Date: Dec 2012
Location: OCONUS
Posts: 64
Now I wish I took WPS in Iraq instead of Afghanistan. 20% to Afghanistan + whatever I’m paying here is gonna suck.
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  #26  
Old 18 February 2018, 02:50
ScoutsOut ScoutsOut is offline
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Join Date: Oct 2006
Location: OCONUS
Posts: 43
From IRS website https://www.irs.gov/individuals/inte...ign-tax-credit:

Quote:
Taken as a deduction, foreign income taxes reduce your U.S. taxable income. Deduct foreign taxes on Schedule A (Form 1040), Itemized Deductions

Taken as a credit, foreign income taxes reduce your U.S. tax liability. In most cases, it is to your advantage to take foreign income taxes as a tax credit.

If you choose to exclude either foreign earned income or foreign housing costs, you cannot take a foreign tax credit for taxes on income you can exclude. If you do take the credit, one or both of the choices may be considered revoked.
Is this saying that you can't claim your 330 exemption and receive credit for the taxes you've paid to a foreign country?
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  #27  
Old 18 February 2018, 10:26
RGR.Montcalm's Avatar
RGR.Montcalm RGR.Montcalm is offline
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Join Date: Oct 2005
Location: Clearing fields of fire
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Quote:
Originally Posted by ScoutsOut View Post
I don't know if it's the same for all companies but for the company I work for it's 10% out of your base pay. It doesn't tax your uplifts. This is WPS in Iraq.
So you're working for SOC?

3 words-

Get an accountant
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  #28  
Old 18 February 2018, 13:40
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256 256 is offline
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Join Date: Dec 2017
Location: Ohio
Posts: 358
1099

Quote:
Originally Posted by Massgrunt View Post
The 1099 thing was essentially fraud in the first place.
The recruiter I’m currently working for said I would be a 1099 independent contractor from the get-go. I don’t like the word fraud being used in relation to 1099, if that’s what I’m going to be working as. Maybe I’m not understanding the content correctly...? I’m planning on staying out of the country for more than 330 days.
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  #29  
Old 18 February 2018, 13:52
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crapstash crapstash is offline
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Join Date: Jan 2007
Location: Probably Oconus
Posts: 304
You will receive money.
You are not an accountant.
See an accountant for possible strategies.

Or, wing it based on hearsay and you’re buddies advice.

Seek an accountant.
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  #30  
Old 18 February 2018, 14:25
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Massgrunt Massgrunt is offline
Policeman Officer
 
Join Date: Oct 2004
Location: Day shift.
Posts: 12,126
Here's the IRS's page on employees vs. contractors.

https://www.irs.gov/newsroom/underst...or-designation
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  #31  
Old 18 February 2018, 15:20
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Sltwtr1 Sltwtr1 is offline
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Join Date: Jan 2005
Location: Soy Paisa
Posts: 2,386
As other have said, get a CPA etc.

There are many threads on here about good ones who specialize in contractors.

If you use Luke Fairfield, I highly recommend (many threads about him) you will receive an e-mail every year that goes over changes and he is a SME on the different situations.

Here is some of it for free:

Luke@FairfieldCPAs.com <Luke@fairfieldcpas.com>
12/16/17
to
Happy Holidays!



It’s that time again! For all of you ex-pats, foreign contractors and overseas residents out there we hope this letter finds you well. We are preparing for another busy tax season. As always, we will do our best to minimize your tax bill and provide relevant advice for your situation. Feel free to pass this email on to anyone in your situation who could use the help or anyone we may have inadvertently missed in this distribution.



Please be aware that identity theft and fraud have continued to be major tax issues. The IRS has a variety of programs in place to fight this, but it still happens alarmingly often. One program that affects many people is the early filing fraud check that the IRS performs. In short, this affects people filing very early in the tax year (mostly January and February but not limited to these times) or people with large refunds. The IRS halts the refund while it performs a check for any potential fraud. This is not an audit or cause for concern other than the unavoidable fact that it will stall your refund for up to 60 days. As tax preparers we have no control over this selection process or the subsequent timing of the refund. It is very frustrating but something that you should be aware of.

Important Updates for 2017:

1) Tax Reform. Much in the news lately and many are wondering how it will affect them. As of the date of this letter, nothing is final. Some details that are emerging are listed below; the earliest implementation of these changes would be 2018. The effect of these changes completely depends on each person’s situation.

The standard deduction will double, personal exemptions will be eliminated, and the child tax credit will increase.
Many tax brackets will be consolidated and reduced.
Deductions for work expenses, moving expenses, tax preparation fees and other non-reimbursed employee expenses will be eliminated.
State tax and property tax deductions will be capped at $10,000.
Limits on the deductibility of mortgage interest on loans over $750k.
Changes with how income from S Corporations and LLCs will be taxed.
Many other changes that are too numerous to list. We will provide more detail once the final tax plan is passed.
2) Afghanistan Tax.

In 2017 Aegis and IDS were withholding a tax on income earned in Afghanistan by foreign personnel. Several other companies withhold Afghanistan tax on the employee’s behalf as well. If you are aware of foreign tax being withheld, please inform us of this fact so we can ensure you get proper credit.
Triple Canopy and Global withhold Iraq tax on income earned in Iraq.
Indonesian Tax. JDA employees are paying foreign tax.
Tax paid to a foreign country can be claimed as a credit on your US tax return (Form 1116).
The credit can be combined with the foreign income exclusion if you qualify but the foreign tax credit is partially reduced when both are used, making this a complex calculation.
SOC may be paying Iraq tax on your behalf and beginning in 2018 SOC will be reporting this fact on your W-2 and withholding this from your wages.
Garda/Aegis has announced it will no longer pay the Afghan tax on behalf of employees in 2018. The company will begin withholding 20% from your paycheck to cover this tax which equates to a pay cut of 20%. There is a rumor that a 20% bonus based on days worked will be issued later in the year but this has not been verified. The difference many of you will notice if you continue to have federal withholding is that your net pay will drop by the amount of the Afghan tax withholding. By changing your W4, this situation can be somewhat alleviated but be aware that the large refunds obtained in past years will not reoccur if no federal income tax is withheld.
3) FATCA. The IRS has enacted many regulations regarding foreign bank accounts and foreign financial instruments. If you have a foreign bank account with a value greater than $10k or foreign financial holdings greater than $50k, you may have a filing requirement to be compliant and avoid possible penalties.

4) IRS notices.

These are very common and are simply the IRS computers electronically reconciling your tax return to records reported by employers, investment brokers, lenders, etc. When an item does not match, a letter is generated. These are not an audit and are usually the result of your not receiving some piece of information that should have been included in your return. If you send me these notices, I can explain what they relate to and can determine if they are correct or not.
Notices related to penalties. For those of you in a combat zone, there should be no penalty assessed on tax due or late filing of any tax return. Getting the IRS to accept this can be challenging. Saving records of your work location, Letters of Authorization and work contracts can be very important in getting these penalties removed.
5) Information update related to IRS audits of the foreign income exclusion:

Interestingly, the IRS suffered a major defeat in their aggressive audit program on the foreign income exclusion. The case of Linde Vs. IRS Commissioner is a good read and will be a major obstacle to the IRS pursuing foreign income exclusion claims under both the physical presence test and the bona fide residency test.
It is critically important that you retain copies of your Diplomatic passport and regular passport, overseas orders, LOAs, overseas expense receipts, VISAs and anything else that can prove you were overseas in a combat zone. Keep these for at least 5 years. Do not turn in your passports without making a scanned, color copy of them.
Should they choose to do so under audit, the IRS can obtain an entry report from CBP and Homeland Security to verify your time in the US.
If you are claiming the exclusion under the physical presence test (330-day rule), some IRS offices are now requiring that your “abode” be outside the US to qualify. Unfortunately, this term is not defined in the tax code and the IRS is using some very old court case ruling to say that it is where you maintain your social and economic ties. For those of you with family in the US, this can raise an issue. Fortunately, the Linde tax court case mentioned above can assist with making the abode issue less of an issue.
6) Our in-house attorney Zac Silides can assist with the preparation, revision or updating of a trust or will and can also assist with other business related legal needs such as the creation of new business entities. Fees for these services are very reasonable compared to other options.

7) Bitcoin and Cryptocurrency. We are receiving many questions about reporting and taxation related to bitcoin. This is an emerging tax area that is seeing increasing interest from the IRS. Please let us know if you have questions or concerns in this area.

Based on the most frequent questions I am asked, I will briefly cover the points most relevant to your situation. The following is a rundown of how your tax situation differs from someone working in the states.



Generally, you will receive the first $102,100 (for 2017) of your income earned in a foreign country tax free provided that:
You were physically present in a country other than the U.S. for at least 330 days out of a 365-day period. This does not have to have been completely in the 2017 calendar year as a prorated partial exclusion can be obtained by extending your tax return until the 330-day period is up. You will still only file using the 2017 calendar year income but your test period for the physical presence test may run from June 2017 – June 2018 or any other dates spanning 365 days. What this does NOT mean is that you can have less than 330 days overseas out of a 365-day period and still take a prorated exclusion. This is a persistent myth and is absolutely not true.
You were a bona fide resident of a country other than the U.S. during 2017. Many of you have received residency Visas from Iraq this year. This is not enough proof to prove bona fide residency per the IRS. Filing under this method requires that you are a foreign resident for the full year starting Jan 1. No partial year exclusion is available. Based on the current audit situation, using this method has become riskier than in the past.
You are generally eligible for an additional extension of time to file and pay your taxes. You have 180 days from the time you return to the states to file any missing tax returns without penalty if you were in a combat zone. That being said, file on time if you can; it keeps you off of the IRS radar.
Filing Form 673… all that filing this form will do is exempt you from tax withholding; contrary to rumor it is NOT required to claim NOR does it qualify you to claim the foreign income exclusion. Additionally, some companies now add the cost of travel, incidentals, meals, reimbursements, etc. to the taxable income of employees filing Form 673. This causes you to be taxed on income that you never received. The best alternative to regulate tax withholdings is to file a Form W4 with your payroll department and claim a large number of allowances on line 5. Generally, between 9 and 15 allowances will have enough withheld to cover your tax bill but you can also write in “exempt” or claim up to 99 allowances to drop withholding to close to zero if you do not expect to owe any tax.
CAUTION: If you choose to file this form, be aware that you may be short on federal income tax withholding if you are injured and unable to remain overseas. This could result in a very large tax bill when your return is prepared.

Keep a list of job related expenses - these are deductions for you. This can include travel, meals, weapons, supplies, body armor, computer, auto, telephone, postage, etc. A simple spreadsheet with yearly totals is the best way to provide this to me. Please do not send receipts; I can provide a very simple spreadsheet template for you to record your eligible expenses. See #5 below for a caution if you are an employee.
Expenses...many of you may have changed from working as an IC to an IE or vice versa. There is a vast difference in what can be deducted. As an IC (you receive a 1099), all expenses related to your work are deductible. As an IE (you receive a W2), only expenses required by your employer but not reimbursed are allowed as deductions and under audit the IRS will require a letter from your company detailing this. Needless to say, this is impossible to obtain from many of the companies. You can continue to deduct work related expenses as an IE but be aware that deducting too much can quickly put you on the radar.
If possible, get an address in a tax-free state and use this as your U.S. address. This may save you some money on your state taxes. Tax free states are TX, FL, AK, NV, WA, SD, WY and TN. This will not work if you have a house and family in another state. CA, AL, PA, MA, NJ and HI are the worst as they do not allow the foreign income exclusion; pay attention if you live here but have the option to claim residency in another state.
I am getting a lot of questions about starting S-corps and LLCs from those of you working as ICs. This is a good move in most cases as properly structured it allows you a savings on what you would otherwise pay in self-employment tax and our attorney Zac can help set this up for you.
Lastly, what will I need from you? Every situation varies but in general I will need W-2s, 1099s, a list of work related expenses, foreign address and city you worked out of and any other tax documents you receive relating to home mortgages, property taxes, investments and other income.


Independent contractors (1099): Do not forget that the IRS will take 15% right off the top of your net income as self-employment tax. You will also pay regular income tax on the earnings. In addition, the foreign income exclusion of $102,100 does not apply to the self-employment tax calculation even though you will get the exclusion in the calculation of income tax. This can result in a very large, very surprising tax bill. Be aware of this and plan accordingly when saving for taxes.

Sltwtr1

OUT
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  #32  
Old 18 February 2018, 16:00
256's Avatar
256 256 is offline
Navigating
 
Join Date: Dec 2017
Location: Ohio
Posts: 358
Thank you, Sltwtr1

I am in contact with Luke from reading through the threads. I really appreciate all that info as well.

Quote:
Originally Posted by Sltwtr1 View Post
As other have said, get a CPA etc.

There are many threads on here about good ones who specialize in contractors.

If you use Luke Fairfield, I highly recommend (many threads about him) you will receive an e-mail every year that goes over changes and he is a SME on the different situations.

Here is some of it for free:

Luke@FairfieldCPAs.com <Luke@fairfieldcpas.com>
12/16/17
to
Happy Holidays!



It’s that time again! For all of you ex-pats, foreign contractors and overseas residents out there we hope this letter finds you well. We are preparing for another busy tax season. As always, we will do our best to minimize your tax bill and provide relevant advice for your situation. Feel free to pass this email on to anyone in your situation who could use the help or anyone we may have inadvertently missed in this distribution.



Please be aware that identity theft and fraud have continued to be major tax issues. The IRS has a variety of programs in place to fight this, but it still happens alarmingly often. One program that affects many people is the early filing fraud check that the IRS performs. In short, this affects people filing very early in the tax year (mostly January and February but not limited to these times) or people with large refunds. The IRS halts the refund while it performs a check for any potential fraud. This is not an audit or cause for concern other than the unavoidable fact that it will stall your refund for up to 60 days. As tax preparers we have no control over this selection process or the subsequent timing of the refund. It is very frustrating but something that you should be aware of.

Important Updates for 2017:

1) Tax Reform. Much in the news lately and many are wondering how it will affect them. As of the date of this letter, nothing is final. Some details that are emerging are listed below; the earliest implementation of these changes would be 2018. The effect of these changes completely depends on each person’s situation.

The standard deduction will double, personal exemptions will be eliminated, and the child tax credit will increase.
Many tax brackets will be consolidated and reduced.
Deductions for work expenses, moving expenses, tax preparation fees and other non-reimbursed employee expenses will be eliminated.
State tax and property tax deductions will be capped at $10,000.
Limits on the deductibility of mortgage interest on loans over $750k.
Changes with how income from S Corporations and LLCs will be taxed.
Many other changes that are too numerous to list. We will provide more detail once the final tax plan is passed.
2) Afghanistan Tax.

In 2017 Aegis and IDS were withholding a tax on income earned in Afghanistan by foreign personnel. Several other companies withhold Afghanistan tax on the employee’s behalf as well. If you are aware of foreign tax being withheld, please inform us of this fact so we can ensure you get proper credit.
Triple Canopy and Global withhold Iraq tax on income earned in Iraq.
Indonesian Tax. JDA employees are paying foreign tax.
Tax paid to a foreign country can be claimed as a credit on your US tax return (Form 1116).
The credit can be combined with the foreign income exclusion if you qualify but the foreign tax credit is partially reduced when both are used, making this a complex calculation.
SOC may be paying Iraq tax on your behalf and beginning in 2018 SOC will be reporting this fact on your W-2 and withholding this from your wages.
Garda/Aegis has announced it will no longer pay the Afghan tax on behalf of employees in 2018. The company will begin withholding 20% from your paycheck to cover this tax which equates to a pay cut of 20%. There is a rumor that a 20% bonus based on days worked will be issued later in the year but this has not been verified. The difference many of you will notice if you continue to have federal withholding is that your net pay will drop by the amount of the Afghan tax withholding. By changing your W4, this situation can be somewhat alleviated but be aware that the large refunds obtained in past years will not reoccur if no federal income tax is withheld.
3) FATCA. The IRS has enacted many regulations regarding foreign bank accounts and foreign financial instruments. If you have a foreign bank account with a value greater than $10k or foreign financial holdings greater than $50k, you may have a filing requirement to be compliant and avoid possible penalties.

4) IRS notices.

These are very common and are simply the IRS computers electronically reconciling your tax return to records reported by employers, investment brokers, lenders, etc. When an item does not match, a letter is generated. These are not an audit and are usually the result of your not receiving some piece of information that should have been included in your return. If you send me these notices, I can explain what they relate to and can determine if they are correct or not.
Notices related to penalties. For those of you in a combat zone, there should be no penalty assessed on tax due or late filing of any tax return. Getting the IRS to accept this can be challenging. Saving records of your work location, Letters of Authorization and work contracts can be very important in getting these penalties removed.
5) Information update related to IRS audits of the foreign income exclusion:

Interestingly, the IRS suffered a major defeat in their aggressive audit program on the foreign income exclusion. The case of Linde Vs. IRS Commissioner is a good read and will be a major obstacle to the IRS pursuing foreign income exclusion claims under both the physical presence test and the bona fide residency test.
It is critically important that you retain copies of your Diplomatic passport and regular passport, overseas orders, LOAs, overseas expense receipts, VISAs and anything else that can prove you were overseas in a combat zone. Keep these for at least 5 years. Do not turn in your passports without making a scanned, color copy of them.
Should they choose to do so under audit, the IRS can obtain an entry report from CBP and Homeland Security to verify your time in the US.
If you are claiming the exclusion under the physical presence test (330-day rule), some IRS offices are now requiring that your “abode” be outside the US to qualify. Unfortunately, this term is not defined in the tax code and the IRS is using some very old court case ruling to say that it is where you maintain your social and economic ties. For those of you with family in the US, this can raise an issue. Fortunately, the Linde tax court case mentioned above can assist with making the abode issue less of an issue.
6) Our in-house attorney Zac Silides can assist with the preparation, revision or updating of a trust or will and can also assist with other business related legal needs such as the creation of new business entities. Fees for these services are very reasonable compared to other options.

7) Bitcoin and Cryptocurrency. We are receiving many questions about reporting and taxation related to bitcoin. This is an emerging tax area that is seeing increasing interest from the IRS. Please let us know if you have questions or concerns in this area.

Based on the most frequent questions I am asked, I will briefly cover the points most relevant to your situation. The following is a rundown of how your tax situation differs from someone working in the states.



Generally, you will receive the first $102,100 (for 2017) of your income earned in a foreign country tax free provided that:
You were physically present in a country other than the U.S. for at least 330 days out of a 365-day period. This does not have to have been completely in the 2017 calendar year as a prorated partial exclusion can be obtained by extending your tax return until the 330-day period is up. You will still only file using the 2017 calendar year income but your test period for the physical presence test may run from June 2017 – June 2018 or any other dates spanning 365 days. What this does NOT mean is that you can have less than 330 days overseas out of a 365-day period and still take a prorated exclusion. This is a persistent myth and is absolutely not true.
You were a bona fide resident of a country other than the U.S. during 2017. Many of you have received residency Visas from Iraq this year. This is not enough proof to prove bona fide residency per the IRS. Filing under this method requires that you are a foreign resident for the full year starting Jan 1. No partial year exclusion is available. Based on the current audit situation, using this method has become riskier than in the past.
You are generally eligible for an additional extension of time to file and pay your taxes. You have 180 days from the time you return to the states to file any missing tax returns without penalty if you were in a combat zone. That being said, file on time if you can; it keeps you off of the IRS radar.
Filing Form 673… all that filing this form will do is exempt you from tax withholding; contrary to rumor it is NOT required to claim NOR does it qualify you to claim the foreign income exclusion. Additionally, some companies now add the cost of travel, incidentals, meals, reimbursements, etc. to the taxable income of employees filing Form 673. This causes you to be taxed on income that you never received. The best alternative to regulate tax withholdings is to file a Form W4 with your payroll department and claim a large number of allowances on line 5. Generally, between 9 and 15 allowances will have enough withheld to cover your tax bill but you can also write in “exempt” or claim up to 99 allowances to drop withholding to close to zero if you do not expect to owe any tax.
CAUTION: If you choose to file this form, be aware that you may be short on federal income tax withholding if you are injured and unable to remain overseas. This could result in a very large tax bill when your return is prepared.

Keep a list of job related expenses - these are deductions for you. This can include travel, meals, weapons, supplies, body armor, computer, auto, telephone, postage, etc. A simple spreadsheet with yearly totals is the best way to provide this to me. Please do not send receipts; I can provide a very simple spreadsheet template for you to record your eligible expenses. See #5 below for a caution if you are an employee.
Expenses...many of you may have changed from working as an IC to an IE or vice versa. There is a vast difference in what can be deducted. As an IC (you receive a 1099), all expenses related to your work are deductible. As an IE (you receive a W2), only expenses required by your employer but not reimbursed are allowed as deductions and under audit the IRS will require a letter from your company detailing this. Needless to say, this is impossible to obtain from many of the companies. You can continue to deduct work related expenses as an IE but be aware that deducting too much can quickly put you on the radar.
If possible, get an address in a tax-free state and use this as your U.S. address. This may save you some money on your state taxes. Tax free states are TX, FL, AK, NV, WA, SD, WY and TN. This will not work if you have a house and family in another state. CA, AL, PA, MA, NJ and HI are the worst as they do not allow the foreign income exclusion; pay attention if you live here but have the option to claim residency in another state.
I am getting a lot of questions about starting S-corps and LLCs from those of you working as ICs. This is a good move in most cases as properly structured it allows you a savings on what you would otherwise pay in self-employment tax and our attorney Zac can help set this up for you.
Lastly, what will I need from you? Every situation varies but in general I will need W-2s, 1099s, a list of work related expenses, foreign address and city you worked out of and any other tax documents you receive relating to home mortgages, property taxes, investments and other income.


Independent contractors (1099): Do not forget that the IRS will take 15% right off the top of your net income as self-employment tax. You will also pay regular income tax on the earnings. In addition, the foreign income exclusion of $102,100 does not apply to the self-employment tax calculation even though you will get the exclusion in the calculation of income tax. This can result in a very large, very surprising tax bill. Be aware of this and plan accordingly when saving for taxes.

Sltwtr1

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  #33  
Old 18 February 2018, 19:20
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bobofthedesert bobofthedesert is offline
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Absolutely second the motion on Luke Fairfield, I have used him for years, both while I was on contract in Iraq as well as after.

After the first 2-3 years the wife "decided" we needed to be using someone "everyone at work" uses, and after her not STFU'ing about it endlessly I said OK, go ahead. Gave her a limited POA for that purpose only. I TOLD THEM not to put me in for the 330 thing because I did not qualify that year. Not only did they put me in for that, triggering an IRS inquiry/request for passport copies, letter from TC showing dates for BOG, etc., they put me down for bogus shit like a $500 donation to Boy's and Girl's Clubs of Nevada that never happened. I have no idea why those folks aren't in jail, but when I got home on rotation, I bagged and tagged all that shit the preparer sent us and Priority Mailed it to Luke, who made the potential nightmare go away by filing an amendment with IRS that was truthful.

Thanks Luke!
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  #34  
Old 19 February 2018, 23:10
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SGTROCK SGTROCK is offline
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Have used Fairfield n Assoc for 10 years. When the Iraqi tax was implemented during my time with TC, 2010-2016, it was 15% on the first 65,000 you made in country.

Rock
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  #35  
Old 20 February 2018, 08:28
Recon012 Recon012 is offline
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I am in a similar situation as Cav. If anyone has some good clarity on how this operates for the taxes please PM me. Recently accepted the offer, DOS accepted Bio, and submitted all clearance necessities. Waiting on interim before training. Will I be able to receive a refund if I claim the foreign tax credit or is it just a wash?
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  #36  
Old 20 February 2018, 10:14
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Sltwtr1 Sltwtr1 is offline
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Quote:
Originally Posted by Recon012 View Post
I am in a similar situation as Cav. If anyone has some good clarity on how this operates for the taxes please PM me. Recently accepted the offer, DOS accepted Bio, and submitted all clearance necessities. Waiting on interim before training. Will I be able to receive a refund if I claim the foreign tax credit or is it just a wash?
Dude, not trying to bust your chops.. But, if you read the thread, the overwhelming guidance is to get a professional. They are not that expensive.. I don't think Luke has ever charged me over $250.00 for all my tax preparation.

Whomever you decide to use, in my opinion, asking guys tax advice on the internet is not the way I would want to go.. I would want a professional who is an SME in this matter since contractors/deployed guys are a niche and specific field.

my .02 cents

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  #37  
Old 20 February 2018, 14:07
Recon012 Recon012 is offline
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Yes certainly. I must have been viewing previous responses. I am definitely going to reach out to a tax guy and just wanted some personal experience accounts. I appreciate all the insight and PM’s about this.
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  #38  
Old 20 February 2018, 21:58
Dangercon Dangercon is offline
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2nd, 3rd and 4th-ing that. Get a CPA.

I'm using Luke's old business partner, Chris Hughes.

I'm not currently on project with SOC (so can't personally attest to this, yet) but my WPS recruiter is still pushing out that SOC is paying Iraqi taxes (at least on T03). Unless this changed in the last 3-5 weeks.
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  #39  
Old 24 February 2018, 20:48
pm410 pm410 is offline
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What about social security? Do we pay the entire thing or does the company split it.
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  #40  
Old 24 February 2018, 20:51
pm410 pm410 is offline
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And I’m confused, a quick search of Luke Fairfield of Fairfield and Hughes shows he was just indicted on a RICO charge for laundering drug money last year. Anyone have any other CPAs?

https://www.google.com/amp/www.sandi...story,amp.html
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