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From offshore to outer space: the universality of tax issues

It almost sounds like a Saturday Night Live skit: the IRS trying to tax astronauts in orbit. But this is no parody to prove a point. As CNN Money reported this week, the IRS makes no exceptions when it comes to orbiting astronauts.

There are also some interesting aspects of tax law that come into sharper focus when viewed – as it were – from space. In particular, in this post we will discuss remind you of the possibility of filing an extension when you can’t pay your taxes on time. We will also touch upon the question of how the location where income is earned affects its taxability.

Let’s start with seeking an extension of the time to file. This is actually a pretty common practice. As we noted in our April 2 post, about 12 million taxpayers took advantage of it last year. Elaborate paperwork is not required – merely a simple form – to obtain an extension for six months.

Astronauts are among those who have taken advantage of this procedure. In 2005, an astronaut who was aboard the International Space Station was among the taxpayers who filed for an extension. A few years before that, an Apollo 13 astronaut communicated with Mission Control in Houston from space, asking for help in getting an extension of the time to get his taxes filed.

Working in space also calls attention to issues about the taxability of income earned outside of the U.S.

Under the current tax code, the IRS views international airspace as subject to U.S. taxation. But how far out into the cosmos does “international airspace” actually extend?

Given the immensity of the infinite, ever-expanding universe that scientists say is out there, it’s a potentially mind-blowing question. And it certainly provides a vastly larger context to the types of questions about offshore accounts that we explore so regularly in this blog.

Source: CNN Money, “Nobody escapes U.S. taxes – even astronauts,” Sophia Yan, Dec. 8, 2014

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