By Tom Andrews, CPA
As the end of 2017 approaches it is time to step back and reflect on your income and expenses for the year. All too often yacht crewmembers are busy with family obligations, holiday charters, and the general chaotic schedule of running a program. Unlike traditional forms of employment the tax rates for yacht crewmembers is dependent on a number of factors. For those of you who like to pay your taxes at the end of the year, now is the time to get your estimates in order. I would recommend you start by reviewing your prior year tax return and ask yourself the following questions:
- Have I earned more income this year than the prior year?
- Have I made any estimated tax payments this year?
- Am I expecting any yearend bonuses?
- Have I sold stock or property this year that may impact my income?
- Will I be receiving a 1099 for the income earned during the year?
With regards to year end income, many crewmembers don’t receive December salary until the first week of January. If this is the case you might have two months of pay in January and this may cause additional income to account for during the following year.
I also recommend for you to account for the sources of income. If you earned tip income during the year you will want to make sure that this income is also included in your taxable income. If you worked for a foreign employer during 2017, make sure that you get the proper name and address of the foreign corporation that paid you during the year, this information will be helpful if you are claiming the foreign earned income exclusion or simply declaring foreign wages during the year.
There are many other scenarios that may affect your income for the year, many of these possibilities won’t be realized until you are actually start preparing your tax documents for filing and by then it may be too late to make additional estimated tax payments without penalties.
Even if you think you may qualify for the foreign income exclusion I advise you still make estimated tax payments. I have consulted with many clients who were on track to qualify for the foreign income exclusion only to return back to the United States due to unforeseen circumstance in which case they don’t qualify for the exclusion and end up owing a large amount of money at the end of the year.
For more information on when estimated payments are due and where to send them please visit the IRS website at irs.gov.