Here it is folks. Every year Luke Fairfield puts out these excellent letters that detail all the specific tax issues related to our profession for that tax year. So read through it and contact him or his partner Chris if you have any questions.
The stuff to watch out for this year are audits. Like Luke mentioned below, I have heard of more and more audits happening in our industry. The government is looking for any ‘loose change’ and taxes owed, so it pays to get prepared with this stuff. If you do get audited, contact Luke immediately and let him work the problem. I will keep this letter posted in my Taxes For Contractors page up top in the blue bar. –Matt
For all you ex-teams, ex-pats, ex special forces, security contractors and operators out there I hope this letter finds you well. In an attempt to keep you current with your tax filings I am sending out this letter as a year-end reminder that 2012 is almost over. There are some very important changes this year that could impact many of you as it relates to the IRS’s new audit interest in the foreign income exclusion. If you read nothing else, read the section below updating you on this topic. As always feel free to pass this email on to anyone in your situation who could use the help or anyone that I missed on this email. As always, I will do my best to minimize your tax bill and provide relevant advice for your situation.
Important Updates for 2012:
1) Audits on the foreign income exclusion have greatly increased. If you worked for Blackwater in 2009 chances are you were audited. Count yourself lucky if you were not as you are in the minority. If you have not heard of a teammate or fellow employee who has been through an audit I would be surprised. These audits have spread from ex-Blackwater employees to nearly anyone filing for the foreign income exclusion. As a result, I would recommend being more cautious in claiming the Foreign Income Exclusion in 2012. After a year of dealing with these audits, the below points stand out as noteworthy and important.
a.It is EXTREMELY important that you contact me in the event that you receive an audit notice. Do not make contact with the auditor for the same reason that you do not file your own tax return. Leave it to professionals with experience dealing with these situations; the results will almost certainly be better with less risk to you.
b.If you filed for the foreign income exclusion under the bona fide residency method and your location was Iraq or Afghanistan, under audit, the IRS will likely take the position that you were not a bona fide resident for tax purposes and will disallow the claim. A residency VISA from your host country is not enough to qualify. Yes, I am quite aware that everyone around you tells you they file as bona fide residents and have never had a problem. To that I can only ask if you have ever been fishing and if you have, did you catch all the fish?