Contract Employee vs. Independent Contractor
Are you an employee for Defense Base Act Insurance purposes
but an Independent Contractor for Tax purposes?
Expat Tax Information 2012
If your are receiving DBA benefits
they are not taxable
Were you injured prior to 2006 and
lost your expat status for USTaxes?
Under provision IRC 662 (a)
you are exempt from the time
requirement of being out of the
country for the full 330 days.
IRS Form 2555
(Foreign Earned Income)
was revised 2006
Determination of Worker Status
for purposes of Federal
Employment Taxes and Income
IRS Form SS-8
Combat Zone Pay Exclusion
The combat zone military pay
exclusion applies only to members
of the U.S. Armed Forces. Neither
federal civilian employees nor
civilian defense contractors
deployed with U.S. forces qualify for
an exclusion of income earned while
working in a combat zone or
qualified hazardous duty area. They
may, however, qualify for an
extension of deadlines to file and
Foreign Earned Income and
Housing: Exclusion – Deduction
You may be able to exclude up to
$92,900 of your foreign earned
income in 2010.
Tax Guide for U.S. Citizens and
Resident Aliens Abroad
Employer's Tax Guide to Fringe
Blackwater Dodges Taxes
Tax Evasion or Fraud
Combat Support Associates,
dodges taxes for a decade
WASHINGTON (AP) — When the
Pentagon announced an obscure
California company had won a lucrative
military contract, no one mentioned any
plans for a Caribbean outpost — a
tropical shell the company quickly
created that allowed it to duck millions
in taxes and deflect U.S. lawsuits.
It's legal, at least for now. Contractors
large and small have been heading
offshore to shield piles of taxpayer
dollars, according to an Associated
Press investigation, but irate
lawmakers are thundering that they'll
put an end to it.
Almost a decade ago, a few months
after winning the deal that has totaled
more than $2 billion, Combat Support
Associates established its subsidiary in
the Cayman Islands, a British territory
and tax haven.
read story here
MPRI dodges taxes
Shell Firms Shielded Contractor
Boston Globe May 4 2008
by Farah Stockman
full story here
WASHINGTON - In March 2005, one
of the Pentagon's most trusted
contractors - Virginia-based MPRI,
founded by retired senior military
leaders - won a $400 million contract
to train police in Iraq and other
hotspots. Two months later, MPRI
set up a company in Bermuda to
which it subcontracted much of the
It was not the first time that MPRI
executives had used a shell
company in an offshore tax haven to
perform government-funded work. A
year earlier, MPRI headed a joint
venture that won a $1.6 billion
contract to provide US
peacekeeping forces in Kosovo and
elsewhere. Three months later, MPRI
set up a company in the Cayman
Islands to do the work.
Like MPRI's Bermuda subsidiary, the
Cayman Islands company appears
to have no phone number, website,
or staff of its own there.
Blackwater Dodges Taxes
IRS CIRCULAR 230 NOTICE: To
ensure compliance with
requirements imposed by the
IRS, we inform you that any U.
S. tax advice within this
website is not intended or
written to be used, and cannot
be used, for the purpose of (i)
avoiding penalties under the
Internal Revenue Code
|Civilian Contractors in Iraq
Defense Base Act Comp
Civilian Contractor News
South African Justice for
Taxes for Expats
|Class Action Tax Misrepresentation Filed Against Xe/Blackwater
Scott Bloch blasts Blackwater on behalf of thousands of former employees who
were mistreated and denied employee benefits, unemployment and other
withholding based on a fraudulent misclassification as independent contractors
The IRS has been targeting civilian contractors as a result of the improprieties
of Blackwater, Ronco Consulting, and others.
Pursuant to an IRS internal memo Memorandum Number: AM2009-0003
Also note that the IRS page to which you link has an important note regarding the
definition of a foreign tax home (which is necessary to claim the Sec 911 benefit).
The IRS has been using this in somewhat of a distorted way to deny the FEIE to
contractors working in Iraq and Afghanistan,, not only those who have families in the
U.S., but also single people who left home, joined the military and then were hired as
If they did not plan in advance and take all the steps necessary to show that their abode
was in a foreign country and not in the U.S. they are disallowing the exclusion.
Many have had inexperienced tax preparers or did their own tax return and the case
dragged on so long that they lost their administrative appeals rights and facing a
substantial tax bill plus penalties cannot afford a good tax attorney to take it to Tax Court.
As a result, the IRS is using their muscle to claim that these workers were living on a
base and had no contact with the local community and therefore their “abode-which is
not clearly defined anywhere) was in the U.S.
This is the quote from the IRS page:
Your tax home is the general area of your main place of business, employment, or post
of duty, regardless of where you maintain your family home.
Your tax home is the place where you are permanently or indefinitely engaged to work
as an employee or self-employed individual. Having a “tax home” in a given location
does not necessarily mean that the given location is your residence or domicile for tax
If you do not have a regular or main place of business because of the nature of your
work, your tax home may be the place where you regularly live. If you have neither a
regular or main place of business nor a place where you regularly live, you are
considered an itinerant and your tax home is wherever you work.
You are not considered to have a tax home in a foreign country for any period in which
your abode is in the United States . However, your abode is not necessarily in the
United States while you are temporarily in the United States . Your abode is also not
necessarily in the United States merely because you maintain a dwelling in the United
States , whether or not your spouse or dependents use the dwelling.
“Abode” has been variously defined as one's home, habitation, residence, domicile, or
place of dwelling. It does not mean your principal place of business. “Abode” has a
domestic rather than a vocational meaning and does not mean the same as “tax home.”
The location of your abode often will depend on where you maintain your economic,
family, and personal ties.
You are employed on an offshore oil rig in the territorial waters of a foreign country and
work a 28-day on/28-day off schedule. You return to your family residence in the United
States during your off periods. You are considered to have an abode in the United
States and do not satisfy the tax home test in the foreign country. You cannot claim
either of the exclusions or the housing deduction.
For several years, you were a marketing executive with a producer of machine tools in
Toledo , Ohio . In November of last year, your employer transferred you to London ,
England , for a minimum of 18 months to set up a sales operation for Europe . Before
you left, you distributed business cards showing your business and home addresses in
You kept ownership of your home in Toledo but rented it to another family. You placed
your car in storage. In November of last year, you moved your spouse, children, furniture,
and family pets to a home your employer rented for you in London .
Shortly after moving, you leased a car and you and your spouse got British driving
licenses. Your entire family got library cards for the local public library. You and your
spouse opened bank accounts with a London bank and secured consumer credit. You
joined a local business league and both you and your spouse became active in the
neighborhood civic association and worked with a local charity.
Your abode is in London for the time you live there. You satisfy the tax home test in the
Note that the IRS agents examining these returns are not seasoned international agents
and their internal directive is to disallow the exclusion regardless of the taxpayer’s
defenses and force it to go to Tax Court.
I have seen many contractors who came to me for help but by that time it was just too
late to help as they needed a tax attorney that they could not afford.
|U.S. Expatriate Tax & Business Solutions
by Powers & Company
40 years specializing in dealing with
US expatriate taxes
Taxes for Expats