Defense Base Act Compensation Blog

The Modern Day DBA Casualty

Posts Tagged ‘Tax Misclassification’

IRS Targets US Expats

Posted by defensebaseactcomp on January 12, 2012

Updates to our ExPat Tax Page

For years companies like Blackwater and Ronco Consulting  have Misrepresented their employees as Consultants or Independent Contractors to the IRS to escape having to pay Social Security and Medicare payroll taxes.

Thank you Blackwater and Ronco Consulting

At the same time these same companies represented these same consultants and Independent Contractors to be employees for the purpose of purchasing the mandated Defense Base Act Worker’s Comp Insurance.  Even going so far as to have contractors sign new backdated employment contracts AFTER they were injured.

Fraudulent activity of this nature has garnered the full attention of the IRS to the Contract Employee much more so than it has the Contract Company.  Blackwater even continued to do this after the IRS busted them.

Bob Powers of Power Tax sends us this and asks that we warn all ExPats to be prepared.

Pursuant to an IRS internal memo Memorandum Number: AM2009-0003

This link IRS  has an important note regarding the definition of a foreign tax home (which is necessary to claim the Sec 911 benefit).

The IRS has been using this in somewhat of a distorted way to deny the FEIE to contractors working in Iraq and Afghanistan,, not only those who have families in the U.S., but also single people who left home, joined the military and then were hired as contractors.

If they did not plan in advance and take all the steps necessary to show that their abode was in a foreign country and not in the U.S. they are disallowing the exclusion.

Many have had inexperienced tax preparers or did their own tax return and the case dragged on so long that they lost their administrative appeals rights and facing a substantial tax bill plus penalties cannot afford a good tax attorney to take it to Tax Court.

As a result, the IRS is using their muscle to claim that these workers were living on a base and had no contact with the local community and therefore their “abode-which is not clearly defined anywhere) was in the U.S.

This is the quote from the IRS page:

Tax Home
Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home.
Your tax home is the place where you are permanently or indefinitely engaged to work as an employee or self-employed individual. Having a “tax home” in a given location does not necessarily mean that the given location is your residence or domicile for tax purposes.

If you do not have a regular or main place of business because of the nature of your work, your tax home may be the place where you regularly live. If you have neither a regular or main place of business nor a place where you regularly live, you are considered an itinerant and your tax home is wherever you work.

You are not considered to have a tax home in a foreign country for any period in which your abode is in the United States . However, your abode is not necessarily in the States while you are temporarily in the United States .

Your abode is also not necessarily in the United States merely because you maintain a dwelling in the United
States , whether or not your spouse or dependents use the dwelling.

“Abode” has been variously defined as one’s home, habitation, residence, domicile, or place of dwelling. It does not mean your principal place of business. “Abode” has a domestic rather than a vocational meaning and does not mean the same as “tax home.”
The location of your abode often will depend on where you maintain your economic,
family, and personal ties.

Example 1.
You are employed on an offshore oil rig in the territorial waters of a foreign country and work a 28-day on/28-day off schedule. You return to your family residence in the United States during your off periods. You are considered to have an abode in the United States and do not satisfy the tax home test in the foreign country. You cannot claim
either of the exclusions or the housing deduction.

Example 2.
For several years, you were a marketing executive with a producer of machine tools in Toledo , Ohio . In November of last year, your employer transferred you to London , England , for a minimum of 18 months to set up a sales operation for Europe . Before you left, you distributed business cards showing your business and home addresses in London .

You kept ownership of your home in Toledo but rented it to another family. You placed your car in storage. In November of last year, you moved your spouse, children, furniture, and family pets to a home your employer rented for you in London .

Shortly after moving, you leased a car and you and your spouse got British driving licenses. Your entire family got library cards for the local public library. You and your spouse opened bank accounts with a London bank and secured consumer credit. You joined a local business league and both you and your spouse became active in the
neighborhood civic association and worked with a local charity.

Your abode is in London for the time you live there. You satisfy the tax home test in the foreign country.

Note that the IRS agents examining these returns are not seasoned international agents and their internal directive is to disallow the exclusion regardless of the taxpayer’s defenses and force it to go to Tax Court.

We recommend you check out Power Taxes pages before you deploy.

U.S. Expatriate Tax & Business Solutions

Posted in Blackwater, Civilian Contractors, Defense Base Act, Exclusive Remedy, Follow the Money, Political Watch, Ronco Consulting, Taxes | Tagged: , , , , , , , , , , , , , , , | 1 Comment »

Statement Concerning Filing of Amended Class Action Tax Misclassification Against Xe Services (formerly Blackwater) on Behalf of Personal Security Specialists for Loss of Benefits and Withholding, Expenses, Penalties, and Treble Damag

Posted by defensebaseactcomp on September 21, 2011

Scott Bloch files Amended Complaint against  Blackwater on behalf of thousands of former employees for unlawful, fraudulent and unconscionable treatment of employees in fraudulent misclassification as independent contractors

Washington DC  September 21, 2011

 Since 2007, Blackwater Industries, which has changed its name to Xe Services, has employed over 10,000 personal security specialists to perform operations in Iraq and Afghanistan under lucrative contracts with departments of the United States Government including the State Department and CIA. While employing these individuals, many of whom are decorated veterans of the armed services including Special Forces, Army Rangers, Navy Seals, Blackwater sought to avoid millions of dollars in taxes, withholding, and payments of benefits to these employees by classifying them improperly as independent contractors.

Yesterday, Scott Bloch filed an amended complaint in the class action lawsuit on behalf of four former security specialists, who were injured while working for Blackwater, in order to recover their payment of social security, unemployment insurance, and unpaid benefits and state and local withholding and unemployment insurance, and other unspecified damages. The action is brought on their own behalf and thousands of others who have worked for Blackwater and its newly named Xe Services. The action seeks $240,000,000 in damages for lost benefits, overtime, treble damages and punitive damages, as well as additional amounts as proved for the class of specialists.

The suit also states that one of the representative plaintiffs already had a determination from the IRS that Blackwater misclassified him as an independent contractor. “The IRS already determined in the case of one of my clients that he should have been classified as an employee,“ said Bloch. “Now thousands of people will have to file amended returns. Thousands of people will likely be entitled to benefits they were denied due to the misclassification, including payment of their employer share of pension, health and disability insurance premiums, and other plans that Blackwater filed with the government for its employees, promising it would not discriminate against those employees as they did here.”

“Blackwater made hundreds of millions of dollars from taxpayers and hired thousands of former veterans of military service and police officers. They also had in their ranks Federal Agents, such as current employees of the FBI on leave of absence. They were hired as security specialists in Iraq and Afghanistan,” said Bloch. “It is a grave injustice to them who were mistreated and left without any health insurance or other benefits for their families, and left to fend for themselves in paying into Social Security and Medicare. They laid down their lives to protect dignitaries and carry out duties in support of wars for America, and they deserve better than this. Many of these same men risked their lives to protect everyone from the President of the United States to U.S. Senators, Congressman, U.S. Diplomats, to Foreign Presidential & Diplomatic Figures in one of the most dangerous places on the planet.”

One of the Plaintiffs guarded such dignitaries as the just assassinated Former Afghan President Burhanuddin Rabbani as well as current Secretary of State and then Senator Hillary Clinton.

“Blackwater acted illegally and unconscionably toward these brave individuals,” said Bloch. ”Through their fraud as pointed out in the Amended Complaint, they avoided overtime for security workers who worked sometimes 12-16 hours a day 6 days a week. They were forced to sign agreements they never read and were not given time to read and not given copies, which took away valuable rights and were unlawful in their terms.”

Read full PRESS RELEASE Amended Complaint against Xe Blackwater here.

Contact Scott J. Bloch, PA:

Scott Bloch, 202-496-1290

Posted in Blackwater, Civilian Contractors, Defense Base Act, Defense Base Act Attorneys, Defense Base Act Insurance, Defense Base Act Lawyers, Follow the Money, LHWCA Longshore Harbor Workers Compesnation Act, Political Watch, State Department | Tagged: , , , , , , , , , , , , , | 2 Comments »

Class Action Tax Misclassification filed against Xe, Formerly Blackwater

Posted by defensebaseactcomp on June 7, 2011

Scott Bloch blasts Blackwater on behalf of thousands of former employees who were mistreated and denied employee benefits, unemployment and other withholding based on a fraudulent misclassification as independent contractors.

Mercadante et al vs Xe Services, LLC et al

    Statement Concerning Filing of Class Action Tax  Misclassification Against Xe Services (formerly Blackwater) on
 Behalf of Personal Security Specialists for Loss of Benefits and Withholding

WASHINGTON, DC (June 7, 2011) –

Since 2007, Blackwater Industries, which has changed its name to Xe Services, has employed over 10,000 personal security specialists to perform operations in Iraq and Afghanistan under lucrative contracts with departments of the United States Government including the State Department and CIA.

While employing these individuals, many of whom are decorated veterans of the armed services including Special Forces, Army Rangers, Navy Seals, Blackwater sought to avoid millions of dollars in taxes, withholding, and payments of benefits to these employees by classifying them improperly as independent contractors.

Yesterday, Scott Bloch filed a class action lawsuit on behalf of four former security specialists, who were injured while working for Blackwater, in order to recover their payment of social security, unemployment insurance, and unpaid benefits and state and local withholding and unemployment insurance, and other unspecified damages.  The action is brought on their own behalf and thousands of others who have worked for Blackwater and its newly named Xe Services.

The action seeks $60,000,000 in damages and punitive damages, as well as additional amounts as proved for the class of specialists.

“These brave individuals who worked in support of Operation Iraqi Freedom and Afghani Enduring Freedom, deserve better than to be turned away without health insurance, pension benefits, unemployment benefits, and other withholding afforded to Blackwater’s other
employees,” said Scott Bloch.

According to the lawsuit, the United States treasury loses billions of dollars annually to misclassified employees.     Under the commonlaw and the IRS 20 questions put out in 1987 pursuant to a regulation, Blackwater was obliged to classify these individuals as employees if Blackwater had the right to control the employees’ actions, manner of performing duties,  hours, training, equipment, whether the duties of the employees go to a core function of the employer or are duties that are consider ancillary to the main purpose of the company, and other factors.

The lawsuit states that Blackwater provided their equipment, including weapons issued by the government, training, and control over employees’ duties, manner of performing their security  duties, operations they went on, protection details and other duties.

“These veterans were actually given diplomatic passports and classified as employees of Blackwater to the United States government in the contracts as they procured insurance required for employees, and also represented to the State Department that they were
employees,” said Bloch in a statement upon filing, “yet when it came to paying taxes, paying  their employer portion of social security and Medicare taxes that all Americans expect their employers to pay, they simply claimed they were independent contractors.”

The suit also states that one of the representative plaintiffs already had a determination from the IRS that Blackwater misclassified him as an independent contractor.  “The IRS already  determined in the case of one of my clients that he should have been classified as an
employee,“ said Bloch.  “Now thousands of people will have to file amended returns.   Thousands of people will likely be entitled to benefits they were denied due to the misclassification, including payment of their employer share of pension, health and disability
insurance premiums, and other plans that Blackwater filed with the government for its employees, promising it would not discriminate against those employees as they did here.”

In addition, claims the suit, the United States Congress previously held hearings under the Oversight and Government Reform committee, Rep. Henry Waxman, Chair, which determined that Blackwater and its related companies misclassified employees in order to avoid millions of dollars in taxes. In addition, the IRS prior to making the determination on the plaintiff in this suit, had ruled on behalf of other Blackwater security specialists, and related job titles, that Blackwater had misclassified these employees who performed services under contracts in Iraq and Afghanistan.

“Blackwater made hundreds of millions of dollars from taxpayers and hired thousands of former veterans of military service and police officers.  They also had in their ranks Federal Agents, such as current employees of the FBI on leave of absence. They were hired as security specialists in Iraq and Afghanistan,” said Bloch. “It is a grave injustice to them who were  mistreated and left without any health insurance or other benefits for their families, and left to fend for themselves in paying into Social Security and Medicare.  They laid down their lives to protect dignitaries and carry out duties in support of wars for America, and they deserve better than this. Many of these same men risked their lives to protect everyone from the President of the United States to U.S. Senators, Congressman, U.S. Diplomats, to Foreign Presidential & Diplomatic Figures in one of the most dangerous places on the planet.”

The case was filed in the United States District Court for the District of Columbia and covers individuals from all over the United States and some Americans living abroad, including all former and current Blackwater and Xe employees and so-called independent contractors.

Contact Scott J. Bloch, PA:
Scott Bloch, 202-496-1290

Law Offices of Scott J Bloch Website

Posted in Blackwater, Civilian Contractors, Defense Base Act, Political Watch, State Department, Taxes, Xe | Tagged: , , , , , , , , , | 13 Comments »

 
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