If you were based out of the country for any part of 2019, you have a couple of options in filing your U.S. income tax return. You are required to still file a return, but chances are, we can get your Federal Income Tax obligation eliminated, or as low as possible.
Below are the tax situations we can take advantage of – and we may use more than one:
Foreign Tax Credit: If you pay income tax to another country, you may take a credit of this tax towards your US obligation. If you were based in the UK we will need three pay check stubs from you to determine the total amount of tax you have paid. As you may know, the UK tax year is April 6th of one year to April 5th of the next. We will need your April 1st, April 15th and December 15th paystubs.
Most UA Flight Attendants who are based at Heathrow will only take the foreign tax credit – the amount of tax you pay to the UK government far exceeds your potential obligation to the IRS.
Foreign Income Exclusion: The IRS allows you to exclude income earned while on or flying over foreign soil. Income earned while flying over international waters or the US is tax as earned in the US. In order to exclude the foreign portion of your earned income, you must qualify as a Bona Fide Resident of a foreign country. To qualify, you must be out of the US for one complete calendar year—January 1 to January 1.
For example, if you were not based in HKG until July of 2018, you will not be able to file your 2018 Federal Income Tax Return until January 1 of 2020. Your qualifying period to meet the Bona Fide Residency Test is January 1, 2019 to January 1, 2020.
You will need to file a special extension until this qualification can be met – which we can file for you.
You do not have to be based in the same foreign country to meet this qualification, just out of the US In order to claim the income exclusion you must also pay income tax to the foreign country where you claim residency – if that country requires you to do so.
Duty Time Apportionment: If you qualify as a Bona Fide resident of a foreign country, we will have to calculate the amount of income that is taxable to the US by a process called Duty Time Apportionment.
Yes, even if you qualify as a Bona Fide resident of another country, any trip that you make back to the US is subject to income tax for services performed over international water and US soil. The only income that can be excluded is that performed while in or over foreign soil.
When we consider this rule – lets look at your flying and which lines are eligible for a greater tax exclusion. If you are flying from LHR to JFK – most of your time is spent over the Atlantic – thus resulting in a fairly high percentage of US taxable income.
If you are flying from LHR to DEN – we have a greater exclusion amount since you are flying over Canada – foreign soil. The more trips you can fly to ORD, DEN, LAX and SFO, the less US income tax you will have to pay. The trips with the highest amount of US tax due are to JFK and IAD. Just an FYI for you to be totally informed and the tax you will owe on the trips that you fly.
We must have a copy of your Year End Audit Report providing the number of trips and each destination.
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