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Did some research at the office today and found Rev. Rul 92-106. It states that if the employer is foreign and the employee a US person, income taxes must be withheld if the ship touches port in the US. The income is not subject to FICA or FUTA because no services were performed in the US. Sounds like a godsend to the employee, until it's time to collect SS or apply for Medicare that is. Thanks for all your ideas. I was thinking along the exact same lines until I found the ruling. This international stuff is so tricky that it reinforces my belief that in the future tax professionals will have to have specialties just like physicians....international, small business, big business, partnerships, estates and trusts, multiple states, investments, etc. Already many of us gravitate toward areas we like and eventually learn a lot about, which brings referrals, which helps us develop more knowledge in that area, which brings more referrals. No one could possible know all the tiny details about every area of taxable income, so at some point we'll be saying heck with it and become specialists instead of generalists. I did a return with foreign earned income exclusion a couple of years ago, and the next thing I knew the guy's banker was calling about a client who wants to set up some foreign trusts!! That was so beyond my limits I told him to find an attorney who specializes in foreign trusts. Sometimes you just have to pass this stuff on. If I were to choose a specialty, it would be estates and trusts. What would others pick?

Oh, did people like the scolding of Soup Nazi better? I was going for a softer image. Maybe I should have gone with a picture of one of my roses, you know, with the prickly thorns on the stem.

I never say "emolument" when I can say "compensation." That's because I eschew obfuscation.