Non-Resident Crewmembers FAQ
Q. I am a non-resident working on a foreign flagged vessel, why am I having tax withheld from my salary?
A. United States tax law requires that non-residents working on foreign flagged vessels have tax withheld from their salary while that vessel is cruising in US territorial waters. Circumstances may vary from vessel to vessel, if taxes are being withheld from your salary then our analysis has determined it is necessary to withhold tax.
Q. What does AvMar do with the taxes withheld from our paycheck?
A. AvMar is required by law to transmit your taxes to the Internal Revenue Service every month.
Q. Are there any exceptions where I won’t have to have taxes withheld?
A. Yes there are exceptions. Taxes are not required to be withheld while the vessel is cruising outside United States territorial water. Also in many cases if you are a resident filer in your country of citizenship there may be a tax treaty between your country and the United States. Many tax treaties permit nonresidents to work inside the United States for less than 183 days without the vessel being required to withhold tax. The catch is in many cases you MUST be a resident filer and file taxes as a resident in your own country, if you are not a resident filer you will not qualify for tax treaty benefits.
Q. I have worked on foreign flagged vessels my entire career and I have never had taxes withheld from my salary, why now?
A. Times are changing, for the most part the yachting industry has remained relatively untouched by US taxing authorities, this has fostered a sense of complacency among owners. The IRS has increased international enforcement budget by 25% and audits are coming.
In the grand scheme of things crewmembers should keep tax compliance in perspective. The average crewmembers falls into a 15% tax bracket and since most vessels travel outside the United States for more than half of the year this means more than half of a non-resident crewmembers salary will remain untaxed, in the end many non-resident crewmembers are paying less than 10% tax with relation to their total yearly salary.
Q. Am I required to file a tax return in the United States?
A. In my experience most crewmembers do not file tax returns in the United States. If at the end of the year you determine that taxes were withheld from your salary while you were working on the vessel cruising outside the United States then you will want to file a tax return in order to have those taxes refunded back to you.
Q. How do I file a tax return?
A. AvMar has an agreement with many of the vessels in which we will prepare a basic non-resident tax return for you at no charge.
Q. Will filing a tax return violate my immigration status?
A. Our responsibility is tax compliance, we are not immigration attorneys. It is our understanding that filing a tax return does not raise red flags with immigration nor should it because they are two completely different compliance issues. If you are concerned about your legal status in the United States we will be happy to refer you to an immigration attorney.