Smart Taxes for Skippers

摘要

Many unwary boat owners believe that there is no need to withhold federal payroll taxes from their crew's earnings. Unfortunately, this could cost them dearly. A vessel owner can be liable for the payroll taxes that he should have withheld. This means that even though you have paid the crew in full, you also have to pay their taxes. Depending on the size of the fishing operation, this mistake could cost hundreds of thousands of dollars. The tax code provides for an exemption from federal payroll taxes, but the requirements for exemption must be carefully followed. The "operating crew" of the vessel must normally be made up of fewer than 10 individuals. The regulations define "operating crew" as including "all persons on the boat (including the captain) who receive any form of remuneration in exchange for services rendered while on a boat engaged in catching fish." Under this definition, even an observer counts as an "operating" crew member. The crew must be on a vessel engaged in fishing. Note: a fishing vessel that is engaged in tendering fish does not meet this requirement. This commonly occurs when crab vessels tender salmon in the summer. Most importantly, the crew share must be based solely on a share of a vessel's catch. This requirement provides the greatest peril of any of these requirements. In my experience, this is where boat owners are most likely to run afoul.