Tax Case Settled… Now it will really ‘hit the fan’


Antarctica Forums Forums Antarctic Memories Message Board Iceboard Archives Employment Tax Case Settled… Now it will really ‘hit the fan’

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  • #784

    Sciencetech
    Keymaster

    FYI, regarding the case vs. the IRS about wages earned in Antarctica. This case has been pending for some time now and there are a lot of people who may be affected by the decision.

    http://www.webcpa.com/article.cfm?articleid=24762

    Text of the story:

    Antarctica Wages Subject to Tax

    Washington, D.C. (July 18, 2007) – The United States Tax Court has decided that wages earned in Antarctica are still subject to taxation.
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    The court issued its decision in the case of Scott E. and Ellen J. Hulse of Boulder, Colorado, who worked at McMurdo Station in Ross Island, Antarctica, in 2000. On their 2000 federal income tax return, they excluded wage income they earned for the work they did there that year.

    However, the court pointed out that U.S. citizens generally are taxed on income earned outside the geographical boundaries of the United States unless the income is specifically excluded from gross income.

    The court concluded that Antarctica is not a “foreign country” for purposes of the Foreign Earned Income Exclusion section of the Internal Revenue Code.

    — WebCPA staff

    #7898

    skua77
    Keymaster

    This is an interesting tale. And as usual the media got stuff wrong. Perhaps because the court got stuff wrong. Here is a http://www.ustaxcourt.gov/InOpHistoric/hulse.TCM.WPD.pdf link to the brief.

    This describes the petitioners as Scott E. and Ellen J. Hulse who were to have been working at McMurdo for ASA/RPSC in 2000.

    Well, it seems that a Scott E. Hulse was the 2000 Pole manager (NOT McM), and I could not find Ellen’s name as having been on the ice (so I suspect the name link is because they filed a joint return. Of course if someone knows otherwise please correct me!)

    I had to post this because Business Week contacted me today about this case because of links on my site. By the way, in addition to the winterover lists for Pole/Palmer on my site, http://www.nsf.gov/od/opp/antarct/treaty NSF posts lists of EVERYONE who goes to any station as part of the Antarctic Treaty reporting. And I just (laboriously) checked the 1999-2000 list, since it is a graphic PDF and you can’t search for text 🙁

    #7899

    Sciencetech
    Keymaster

    The Boston Globe (Boston.com) recently posted an interesting article regarding the tax case. URL: http://www.boston.com/business/personalfinance/articles/2007/10/31/tax_ruling_leaves_150_raytheon_workers_out_in_cold/

    In case the article goes away (and at a slight risk of copyright violation) here is the text of it:

    Tax ruling leaves 150 Raytheon workers out in cold
    Pay for Antarctic work not considered by IRS as earned outside US

    By Jonathan Berr, Globe Correspondent | October 31, 2007

    Meghan Prentiss thought working for Raytheon Co. as a meteorologist at McMurdo Station in Antarctica was “like going to the moon for a year.” But as far as the IRS is concerned, she never left the state of Massachusetts.

    What the 31-year-old Boston resident describes as “the ultimate adventure” seven years ago turned into a painful lesson in tax law. Prentiss is among about 150 people who worked on the frozen continent for the Waltham-based defense contractor who were penalized by the Internal Revenue Service for claiming on their taxes that they were working outside the United States.

    Because other federal courts have ruled that Antarctica is a foreign country with regards to tort claims and the Fair Labor Standards Act, the workers believed they were on safe ground claiming the Foreign Earned Income Exclusion, which allows some US citizens who work overseas to exempt as much as $82,400 in income from federal taxes.

    But the Tax Court, which handles disputes between the IRS and taxpayers, thought otherwise. In a January ruling that’s binding for all the cases, the court said the workers’ arguments were “irrelevant or without merit” since they were based on laws other than the tax code, which specifies that foreign countries must have governments recognized by the US government. The US rejects any territorial claims over Antarctica.

    “I guess I fought the law and the law won,” joked Prentiss, whose case was officially decided this month.

    Many Raytheon workers claimed the foreign income deduction for years, according to Dean Klein, who spent 12 seasons at the South Pole. Raytheon took over running the Polar research stations for the National Science Foundation in 2000. The company hires about 1,000 contract workers at the South Pole and employs 400 there full-time, supporting three year-round research stations and two vessels.

    “Until Raytheon took over, there was never an issue with the IRS,” said Klein, 45, a North Carolina resident who hasn’t been hired back by Raytheon since 2005. “I was told that you didn’t need to worry.”

    But a company spokesman, Jonathan Kasle, said workers hired for Antarctica are told during orientation that they can’t claim the foreign income exclusion.

    Many of the workers who had the tax problems used a Colorado accounting firm run by former IRS official Joyce Zeglin, said Scott Saltzman, a former Raytheon worker from Brockton. At Zeglin’s suggestion, they hired a tax attorney together. “The idea was power in numbers,” Saltzman said.

    It didn’t work out that way. Zeglin said she was disappointed with the ruling. Larry Harvey, the Colorado lawyer who represented the workers, said he isn’t filing an appeal because chances are slim for prevailing.

    The question of who owns Antarctica is unsettled as a matter of international law. New Zealand claims sovereignty over the Ross Dependency, where McMurdo and Palmer Station are located. The United States doesn’t recognize New Zealand’s claim.

    “Not all [New Zealand] law is automatically applied to or exercised in the Ross Dependency,” said Lorraine Schofield, a spokeswoman for the New Zealand Embassy in Washington, who said she was unable to determine if tax law was applicable. “It is significant to note, though, that [New Zealand] does not exercise jurisdiction over other national programs in Antarctica, including the US”

    Tangling with the IRS has taken its toll on the former polar workers. When she first was notified the agency had questioned her taxes, Prentiss immediately posted a $5,000 bond, which forced her to borrow more than she planned to go to graduate school. Other former Raytheon workers found themselves in worse shape.

    Saltzman fell down a flight of stairs at Palmer in 2002, breaking his neck leaving him disabled. He took the same deduction Prentiss did in 2001 and now owes the IRS $12,604.71, which includes $1,665.75 in penalties, and $2,112.93 in interest, which he’s paying off in monthly installments of $171. The IRS seized his social security benefits from his bank account and wouldn’t release them until he worked out a payment arrangement.

    “I got a raw deal,” said Saltzman, 43, who lives in Florida part of the year because he can no longer take New England winters. “Now, if I miss a payment they will take my disability away again.”

    #7900

    Sun Dog
    Member

    Bummer! I would have to give the group a lot of credit for trying.

    In the IRS instructions for form 2555-EZ and form 2555 for 2007 you will see this>

    Under Foreign country.

    The term “Foreign country” does not include U.S. possessions or territories. It does not include the Antarctic region.

    http://www.irs.gov/pub/irs-pdf/i2555ez.pdf

    SD, I am not a accountant/CPA just another taxpayer/citizen.

    #7901

    Sciencetech
    Keymaster

    Yeah. When I first started working on the Ice I had a friend — a corporate tax accountant — look into taking the foreign income exclusion. She’s like a pit bull when it comes to deductions, but she came back and said “No can do.” Drat!

    So I never did it. But every year I’d listen to other people talk about how they got money back. Even when they knew the law they’d use rationalizations like, “I’m living in the Ross Dependency”, or “My dorm room at the Pole is in the NZ wedge.” Riiiiight.

    I really wish the case had come out in their favor. I would have amended at least four tax returns to apply for the deduction for another $20-30K back. Double drat!

    g

    #7902

    Sun Dog
    Member

    After living/working there you would think the US govt would give you a break and let you get a refund of all the fed tax or least a big portion of it, based on being in a non government (nation) area and that it is a rough place to work and live.

    #7903

    Baghdad Jim
    Member

    I was wondering about this one here…:

    http://www.delawareonline.com/apps/pbcs.dll/article?AID=/20080317/NEWS03/803170356 … /803170356

    he’s not a US citizen, his student visa doesn’t allow him to hold a job in the US…but he can get a job as a weather tech at McM while taking online courses with Delaware Uni? presumably with RPSC. How does that work out?

    If true, then he’s also not paying any of the taxes that anyone else does.

    #7904

    skua77
    Keymaster

    Jim,
    I don’t know the details, but it sounds like he’s not working for Raytheon. Much of the met stuff at McM, as well as the air traffic control, is done by a company called Aviation Technical Services (ATS) which has a Navy contract with SPAWAR (Space and Naval Warfare Systems Command). Of course NSF is the client, but they are not listed on the http://www.usap.gov/jobsAndOpportunities/ USAP job page. And I did do a fairly detailed web search once for their job opportunities, but found nothing.

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