How to file taxes for US Citizen working on International Cruise Ship

The situation you're describing is pretty common for US citizens working on cruise ships. Your nephew will need to report all his income on his US tax return regardless of where it was earned - that's the fun part of being a US taxpayer! For the tax forms, he should receive some documentation of his earnings from the cruise line, even if it's not a traditional W-2 or 1099. If he doesn't receive anything, he should keep detailed records of all payments received. He'll need to report this as foreign earned income on his tax return. The good news is that he might qualify for the Foreign Earned Income Exclusion (Form 2555) if he meets either the Physical Presence Test (330 full days outside the US in a 12-month period) or the Bona Fide Residence Test (establishing residence in a foreign country). This could exclude up to $120,000 (for 2025) of his foreign earnings from US income tax. Regarding Social Security and Medicare taxes, this gets tricky. Since he's employed by a foreign employer on a foreign-flagged vessel, he may not be subject to US self-employment tax. However, this depends on several factors including whether the cruise line has a US office that manages employment and whether there's a totalization agreement between the US and the country where the cruise line is based.

Just wanted to share my experience. I was in a similar situation a few years back when I worked for Royal Caribbean. I used taxr.ai (https://taxr.ai) to help me figure out the whole foreign income situation. Their AI analyzed my employment contract and cruise schedule to determine exactly what I needed to file. The tool helped me understand that I qualified for the Foreign Earned Income Exclusion which saved me thousands! It also explained how to handle the Social Security/Medicare taxes situation, which was honestly the most confusing part. They have specific expertise with maritime employment situations, which most regular tax preparers don't. If your nephew is gone for 330+ days, he'll likely qualify for the exclusion. But the tool will help determine that based on his specific schedule and situation.

Just wanted to follow up on my skeptical comment about taxr.ai. I actually decided to give it a try for my daughter's situation and I'm honestly impressed. They have a specific section for cruise ship employees that walked me through exactly how to document her income without traditional forms. The system helped us create a proper income log based on her deposit statements and calculate exactly what she owes. It even generated a detailed cruise itinerary report that shows she qualifies for the Foreign Earned Income Exclusion. The best part was when it explained the totalization agreement with her cruise line's country that exempted her from having to pay both sides of FICA taxes. Definitely worth trying if you're dealing with overseas employment situations!

I worked on Norwegian Cruise Line for 2 years as one of the few Americans on board. Getting through to the IRS for guidance was impossible - I spent hours on hold and got disconnected every time. I finally used Claimyr (https://claimyr.com) to get a callback from the IRS. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent was actually super helpful once I got through. They confirmed I needed to file Schedule C for my income since I didn't get a W-2, and explained that I needed to pay self-employment tax on my earnings. They also walked me through Form 2555 for the Foreign Earned Income Exclusion, which meant I didn't owe any federal income tax on that money! Just had to pay the self-employment portion. If your nephew is getting paid via that foreign debit card, the IRS will want to know about any bank accounts he has abroad if they exceed $10,000 at any point (FBAR reporting).

Need to eat my words here. After struggling for another week trying to get through to the IRS myself about my husband's foreign contractor situation, I broke down and tried Claimyr. Got a callback from an actual IRS agent in under 90 minutes. The agent confirmed that my husband DOES qualify for the Foreign Earned Income Exclusion even though he works on ships that dock in the US occasionally. She explained that what matters is the total days outside the US, not whether the employer is foreign. She also clarified the self-employment tax situation - he does have to pay it since there's no totalization agreement with the cruise line's country. Saved me hours of frustration and probably a lot of money too - I was about to file without claiming the exclusion because I couldn't get a clear answer. Sometimes you have to admit when you're wrong!

One thing nobody's mentioned yet - your nephew should look into whether he's paying into another country's social security system. Some countries require contributions from workers on their flagged vessels. If he's paying into another country's system AND there's a totalization agreement between that country and the US, he might be exempt from US Social Security taxes. Also, make sure he knows about FBAR requirements if he has foreign financial accounts totaling over $10,000 at any point during the year. That debit card might count as a foreign financial account depending on how it's structured.

Important point - even with the Foreign Earned Income Exclusion, your nephew will need to file a tax return even if he doesn't owe anything. Missing the filing requirement can cause problems later. Also, some tax software doesn't handle foreign income situations well. I tried using TurboTax for my cruise ship income and it was a mess. Ended up using H&R Block's premium version which had better support for Form 2555.

Just want to add something that might help with the quarterly payments question - your nephew should definitely set up estimated tax payments if he's not having taxes withheld. The IRS safe harbor rule means he won't face penalties if he pays 100% of last year's tax liability (or 110% if his AGI was over $150K) divided into four quarterly payments. Since he's just starting this job, his previous year's tax liability was probably much lower, so this could be a manageable amount while he figures out exactly what he'll owe with the cruise income. One more thing - if the cruise line has any US operations or offices, they might actually be required to withhold US taxes even for foreign-flagged vessels. It's worth having him ask HR about this directly. Some cruise lines do withhold for US citizens even when they're not legally required to, just to make things easier for their American employees. The international debit card situation is pretty standard in the cruise industry, but make sure he keeps detailed records of every deposit. Screenshot the deposit notifications, save monthly statements, whatever he can get. The IRS will want to see proof of income even without traditional tax forms.