Rev. Proc. 79-38

Section 1. Purpose

The purpose of this Revenue Procedure is to set forth procedures relating to the reporting of wages and payment of the taxes imposed by the Federal Insurance Contributions Act, the Federal Unemployment Tax Act, and the Collection of Income Tax at Source on Wages (chapters 21, 23, and 24, respectively, subtitle C, Internal Revenue Code of 1954) with respect to seamen employed by certain maritime shipping operators, and to modify and restate, as modified, the special "end-of-voyage" reporting procedures provided for in Mim. 6314, 1948-2 C.B. 148.

Sec. 2. Background

.01 Under the provisions of Mim. 6314 employers in the maritime shipping industry were authorized to defer the reporting of the taxes imposed by the Federal Insurance Contributions Act until the end of a voyage. Difficulties had been encountered by shipping operators in ascertaining the amounts of wages paid to seamen while they were on a voyage. Mim. 6314 permitted the employer to defer the reporting of seamen's wages until full wage data was ascertainable at the end of the voyage and enabled the employer to report the correct amount of wages paid to each seaman in each quarter, as distinguished from a tentative sum for each seaman which was subject to subsequent correction.

.02 Under current maritime law it is unlawful to pay wages to a seaman in advance of the time they have been actually earned. A seaman may stipulate in the seaman's shipping agreement an allotment to certain specific designees of up to 90 percent of wages earned, after allowing for a deduction to cover the federal withholding taxes. Overtime pay may not be included in such allotment. (Merchant Seaman Act, 1872, as amended, 46 U.S.C. 599 (1970) and 46 CFR 15.10 (1975)). Allotable wages encompass base wages, automation pay, and non-watch pay.

.03 Upon reconsideration of the difficulties encountered by shipping operators in ascertaining the amounts of wages paid to seamen while they are on a voyage, the procedures in Mimeograph 6314 are modified to more accurately reflect current conditions in the shipping industry.

Sec. 3. Procedures

.01 The following are the procedures to be followed for purposes of the FICA and the FUTA.

1 Effective for voyages beginning after August 27, 1979, maritime employers are required to report and pay the taxes imposed by the FICA and the FUTA on allotments paid to the designees of their seagoing employees in the same manner as they report and pay such taxes on wages paid to their shore employees.

2 With respect to the total wages of a seaman, including advances, slops, and the fair value of board and lodging, shipping operators should, at the end of each voyage:

(a) Compute the wages paid to each seaman in each quarter during such voyage.

(b) Determine (under the limitations in sections 3121(a) of the Federal Insurance Contributions Act and 3306(b) of the Federal Unemployment Tax Act applicable to wages paid to each employee in each calendar year) the amount of remuneration that is each seaman's taxable wages for each calendar year.

(c) Deduct the employee's Federal Insurance Contributions Act tax that has not previously been deducted on the taxable wages.

(d) Report on the Form 941, Employer's Quarterly Federal Tax Return, for the current quarter wages paid in such quarter to seamen whose voyages ended in the quarter. Such wages should be reported in the same manner as the wages of shore employees and the seamens' allotments.

(e) Report on Form 941c, Statement to Correct Information, total wages previously reported, and as corrected, for each prior quarter.

(f) Enter as adjustments on the current Form 941, the amounts of employers' tax and employees' tax on the additional wages reported on Form 941c.

(g) Issue an employee a corrected Form W-2, Wage and Tax Statement, to show the corrected amount of FICA wages and FICA tax.

(h) Report on Form 940, Employer's Annual Federal Unemployment Tax Return, wages paid during the year.

(i) If necessary, file an amended Form 940 for the previous year.

.02 The income tax required to be withheld at source on allotments must be reported and paid by the employer for each quarter in which the allotments of the seamen are paid. The income tax required to be withheld at source on income other than allotments must be reported and paid by the employer for the quarter in which the voyage ends.

Sec. 4. Application to Employee

.01 The allotments paid to the seaman's designee must be included in the seaman's gross income in the taxable year the allotments are paid.

.02 A seaman does not have to report in gross income other wages such as advances or slops until the taxable year in which the voyage ends.

Sec. 5. Effect on Other Documents

Mim. 6314 is modified and superseded.

Sec. 6. Effective Date

This Revenue Procedure shall be effective for voyages beginning after August 27, 1979.

¹ Prepared pursuant to Rev. Proc. 67-6, 1967-1 C.B. 576.