CCH Tax News Headlines - April 12, 2010

CCH Tax News Headlines - April 12, 2010 Federal Headlines:

4/12/2010 - _IRS Reminds Taxpayers of Common Filing Errors (IR-2010-46)_
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4/12/2010 - _Withholding of Tax on Wages of Nonresident Alien Flight Attendants Discussed (TAM _
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State Headlines: 4/12/2010 - _California --Corporate, Personal Income Taxes: Conformity Bill Without Erroneous _
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4/12/2010 - _Kentucky --Sales and Use Tax: Court Dismisses City's Case Against Online Travel _
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4/12/2010 - _Pennsylvania --Multiple Taxes: DOR Updates Amnesty Guidelines_
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Reply to
TaxService
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The quote says

The determination of what portion of the attendants' wages was U.S. source gross income and wages for services performed in the United States was made by applying a time-based method measured in hourly units. Under this method, as provided under Rev. Rul. 77-167, 1977-1 CB 239, the total compensation paid to an attendant is multiplied by the percentage of time the individual worked in the United States during the period to which the compensation relates. According to the IRS, the calculation of time worked within and without the United States should take into account all time that the attendant was required to report for duty, including pre-flight, post-flight and training time.

How is "in the United States" defined? Say the airplane goes from Paris to New York. Does in the US begin when the plan touches down in New York, or when the airplane crosses the geographical boundary (maybe 0 to 100 miles from the coast while the plane is still in the air)?

And supposing the US based compensation is $3,500, then do they get a deduction of $3,000, so that only $500 is subject to US tax, or is the entire $3,500 subject to US tax?

And which country gets to tax the money first? Suppose the employee is from France. If the US gets to tax the money first, then US will gets it's share of tax on $500 or $3,500, and on the employee's France tax return they will claim a foreign tax credit for taxes paid to the US on this income. If France gets the money first, then on the US tax return there will be a foreign tax credit, possibly wiping out the tax.

Is the $3,000 adjusted each year for inflation?

Reply to
removeps-groups

I believe the definition derives from the section that deals with the substantial presence test. This would include the 50 states and D.C and US territorial waters. It excludes US possessions. It excludes air space.

The TAM is providing information on the rules of the business visitor exception that allows all of the compensation to be treated as foreign source income. If you fail any prong of the test, then you will have US source income based on where you earned it... see above.

If an NRA works in the US, the US will tax the compensation unless there is a tax treaty and that treaty specifically provides an exemption from tax. If there is no treaty exemption, the NRA would have to seek a tax credit from the home country. E.g., many treaties provide an income tax exemption for NRA students, teachers, scholars and researchers.

No.

Reply to
Alan

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