AvMar Yacht Payroll & Accounting Blog

Starting 2017 on the RIght Foot

By Tom Andrews, CPA

As you begin the 2017 tax year now is the time to implement habits and strategies that will make filing easier for you at the end of the year. Many of the taxpayers I speak with take a reactive stance to tax planning that is sometimes detrimental to their long term plan, now is the time to be proactive.   Working in the yachting industry will present you with a number of problems that many land based tax payers will never contend with.  Some of those issues include but are not limited to the following: Read More »

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Crewmember Verification Foreign Flag

By: Tom Andrews, CPA

As a crewmember on a foreign flagged vessel you are probably being paid in one of three ways:

  1. You are issued a W-2 with taxes withheld.
  2. You receive a 1099 at the end of the year.
  3. The employer is simply depositing funds to your bank account without provided a W-2 or 1099.

Read More »

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Trump Tax Plan

By: Tom Andrews, CPA

Now that a republican president has been elected to office along with a majority republican congress, tax reform is almost certain.   Since the election I have had a handful of clients contact me to inquire how tax reform might affect them.  At this time I do not have an answer, while the President-elect’s tax proposal may seem aggressive it seems many of his proposals have been extreme.  By his own admission his proposals are a starting point with an anticipated negotiable outcome.  Before discussing how these proposals might affect yacht crew, let’s review the broad strokes of the President-elects  proposed plan:

  1. Condense the tax code to three brackets 12%, 25%, and 33%.
  2. Eliminate the 3.8% net investment tax.
  3. Eliminate the carried interest deduction.
  4. Eliminate the $4,000 personal exemption.
  5. Increase the standard deduction from $6,300 to $15,000 for single individuals and $12,600 to $30,000 for married individuals.

Read More »

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IRS Phone Scam Leaves Yacht Crew Vulnerable

By: Tom Andrews, CPA The Internal Revenue Service has received almost 90,000 complaints from tax payers who have received unsolicited calls from individuals demanding payment while fraudulently claiming to be from the IRS.  This can be especially troublesome to yacht crewmembers most of whom  travel frequently. Many crewmembers are away from home for extended periods of time.  This sometimes leaves doubt as to whether or not they may have lapsed in filing a tax return or making an estimated tax payment.  I have had several clients and their families receive these calls and luckily none of them have handed over confidential information. During a recent encounter we had a client living in England receive a phone call from a gentleman claiming to be from the IRS, since she has been out of the United States for an extended period of time she was led to believe that she had missed some important tax filing deadlines. Upon calling our office we were able to reassure her that the phone call she received was a phone scam, later confirmed upon calling the IRS. IRS commissioner John Koskinen has stated “Taxpayers should remember their first contact with the IRS will not be a call from out of the blue, but through official correspondence sent through the mail. A big red flag for these scams are angry, threatening calls from people who say they are from the IRS and urging immediate tax payment.  This is not how we operate. People should hang up immediately and contact the IRS.” Additionally, it is important for taxpayers to know that the IRS: Read More »

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Social Media and Your Taxes

By Tom Andrews, CPA

Several years ago I wrote a column that explored an interested development in IRS audit techniques.  As technology has improved the IRS began researching the social the social media accounts of tax payers.  The IRS insists that it is only using information that is public so as long as your privacy settings are up to date and social media  profiles are not made public the information should remain private.

This is of special notice to Americans working in the yachting industry.  Many yacht crewmembers have claimed the foreign earned income exclusion or deducted various “travel expenses”.  If audited the IRS expects to see supporting documentation and other evidence that supports your claim for these deductions.  IRS auditors will even gather all of the receipts you provide them for a given day and make sure all of those receipts and supporting documentation are in sequence.  For example if a yacht crewmember has not filed taxes in several years or has not reported income a quick search of their social media might indicate they are gainfully employed and living a lifestyle that might not be afforded to an unemployed individual.  Read More »

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Are My Yacht Club Dues a Deduction

By Tom Andrews, CPA

Deducting membership dues has always been a highly scrutinized deduction by the IRS, club memberships are naturally a target because they are considered an entertainment expense and these types of expenses have a strict supporting documentation standard with the Internal Revenue Service.

When it comes to membership dues the IRS distinguishes between dues paid to clubs, which often are not deductible, and dues paid to professional organizations, which are deductible.

Generally, you may not deduct dues paid to social, athletic, sporting, airline, hotel, and luncheon clubs. The IRS views these organizations as providers of entertainment for their members. In contrast, dues paid to professional associations, trade associations, and public service groups may be deductible if you paid the dues for a business purpose and the organization’s purpose is not entertainment. However, other business expenses paid at a club, such as meals, may be deducted to the extent they satisfy the other requirements for a business deduction. If you take your client to your club for lunch during which a substantial and bona fide business discussion takes place you may deduct 50 percent of the cost of the lunch.  Read More »

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Crew Vehicle and Automobile Expenses

by Tom Andrews, CPA

Many yacht crew members will use their personal vehicle for vessel / yacht business.  In many cases they are not reimbursed by the vessel and simply use the vehicle without regard for the potential tax benefits of an auto deduction. If a vehicle is used exclusively for your business, then generally you may deduct the  cost for the operation of the vehicle.   It should be noted however that the standards of “exclusive use” are hard to meet. It’s more likely that your vehicle is used for both personal and business and you will, therefore, have to determine what operation expenses are considered deductible.

Generally, travel between two business destinations is considered a deductible operation of the vehicle. This  means that  travel from your vessel  to the post office to deliver mail or the supply store to get provisions. This also includes travel from one vessel  location to another’s and back to your vessel or place of business. Travel to work locations that are different from that of your regular place of business also count. However, travel from your home to your regular place of business on a regular basis is NOT deductible, these are considered “nondeductible commuting miles”. Read More »

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Understanding Your Compensation Structure

by: Tom Andrews, CPA

As we approach the midway point of tax year 2016 it is important for crewmembers to have an understanding as to how the vessel views the services you provide.   Many times the crewmember and the owner  will define their own relationship differently.  Sometimes crewmembers and owners will come to an agreement as to how they would like their relationship to be defined however the IRS may define that relationship differently.  This confusion may have adverse consequences when the crewmember is planning for their yearend taxes.

One of the more frequently asked questions I receive this time of year is “What can I do before year end to save money on taxes?” My answer will vary depending on the client however in most cases my follow up question is “How will your employer be reporting your income?”  “How does your employer define your relationship”? Read More »

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Affordable Care Act and What This Means to Yacht Crewmembers

by Tom Andrews, CPA

The Patient Protection and affordable Care act commonly referred to as the Affordable Care Act or “Obama Care” was signed into law in 2010, the major provisions of this law will be phased in starting January 2014.  There has been confusion among many yacht crewmembers as to how this law will affect them and if they are required to comply.  In most cases American crewmembers working on US flagged vessels and foreign flagged vessels will be required to comply, there may be some limited exceptions however this column is intended to address the broad compliance issues faced by individuals working in the yachting industry.

The most controversial aspect of the Affordable Care Act is the individual mandate, this provision of the legislation requires most American’s to be enrolled in an Affordable Care Act compliant health care insurance policy.  The penalty for not enrolling in an ACA compliant policy is that the noncompliant individual will have to pay a penalty of $695 per adult/ 347.50 per child or 2.5% of your household income whichever is higher.  Unfortunately for many yacht crewmembers the global policies offered are not ACA compliant.  If the yacht crewmember owns and individual policy they will need to contact their insurance agent to confirm if their policy is ACA compliant or if the insurance is employer provided the crewmember will need to contact the yacht payroll processing company and inquire if the group policy is ACA compliant.  Read More »

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2016 Foreign Earned Income Exclusion Update

By Tom Andrews, CPA

The FEIE (foreign earned income exclusion) is so frequently asked about I write an update column every year. Unfortunately the most common misconception about the FEIE is that if an American lives outside the United States for more than 183 days they automatically qualify.  I believe this myth is perpetuated by the fact that some other countries allow their citizens to file as nonresidents if they leave their country for more than six months, this naturally leads Americans to believe the United States has a similar law.

While it is true that simply living outside the United States for 183 will not exempt you from taxes there is a provision of the tax code that allows Americans to exclude from gross income up to $101,300 (in 2016) of foreign earned income, as well as certain employer-provided housing costs. In order to qualify for these exclusions and deductions, an individual’s tax home must be in a foreign country and he must meet either a residence or physical presence test. A determination of whether a taxpayer qualifies is based on all the facts and circumstances including:  Read More »

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