So you want to be an OEF/OIF contractor? (part 1)

We've talked about a lot of the little oddities and inconveniences that we've encountered and many suggestions for enduring the experience, so I thought it would be helpful to gather a lot more of the information together in one area. I might break this out into seperate posts, but the general areas that you really need to pay attention to are "Motivation and Money", "Where to work", and "Who to work for".

I don't really have any familiarity with the private security contractors, the people that are paid to be heavily armed, moving around off-base, and getting shot at, so I'm only going to discuss jobs that are primarily on base. I'm a techincal (IT security) professional, so that's my primary focus, but I'll have some pointers for non-IT jobs as well.

Motivation and Money

A lot of people begin the process of working in OEF (Operation Enduring Freedom) and OIF (Operation Iraqi Freedom) with the motivation of contributing to the mission for a variety of personal reasons. A lot of people come out here because of the simple fact that they can make, or think they can make, two to three times as much money as they can back home. Regardless of your motivation you must pay attention to the money because not paying attention to the money can lead you down some very painful and expensive blackholes.

Taxes are the most dangerous part of the money equation. Congress gave explicit instructions to the IRS that anyone working in support of OEF/OIF was to receive tax exempt status for those wages. The IRS has decided that this does not include contractors, who are treated generally only as Americans working in a foreign country. As a foreign based employee this means that the first $82k (roughly) of your salary and the first $12k (roughly) of your housing expenses are tax exempt. The IRS frequently changes the rules for "foreign based employees" since they have a generally derisive attitude towards "expats", so you need to be careful and hire a good tax accountant or tax lawyer well versed in these issues.

If you are in Iraq or Afghanistan you will be living in government owned and provided housing, so you don't have to worry housing or vehicles. If you are in Kuwait, Qatar, or other ME (Middle East) countries you will generally live in an apartment or villa off base and have some kind of vehicle shared or provided. These housing arrangements can be nice, but the expense will count against you as income for tax purposes and will end up costing you. They are generally not optional, so you need to take that into account when you are evaluating your pay. You also need to take into account the pain and suffering involved in driving in these countries and getting on and off the base each day.

The big tax exemption is for the military and federal civilian personnel. All of the money they earn during a month during which they spend time in a hostile zone is tax exempt. This is why top officials and congresscritters usually visit over the cusp of two months, so in two to four days they can get tax exempt status for 2 months of pay. During their stay they also receive the State Department set "Hazardous Duty" and "displacement" uplifts, which curently total 70% in additional pay for Iraq and Afghanistan. These exemptions and bonuses are well earned because they are generally the lowest paid people around here, especially the military. I don't have any advice for landing the federal jobs, though my understanding is that they are looking for volunteers, I think you have to already be a federal civilian to volunteer.

The place where most contractors really get into trouble on taxes is navigating the exemptions. Most companies will not withhold taxes because you are "exempt", though you can elect for voluntary withholding and it has been suggested that you withhold 20% of your pay just in case. The magic number for the tax exemption is 330 days, meaning that you are essentially signing up for indentured servitude for 330 days if you do not want your earnings to be subject to taxes. If you quit or get fired before your 330 days are up it will probably be to your advantage to "vacation" out of the country until you have accumulated 330 days outside of the US.

As you evaluate your options you have to pay attention to the money because it really dictates your working and living conditions in the job. The more you are getting paid, the more interesting and valued your work will be. Your pay rate will also influence your GS (Goverment Service, the federal pay scale) equivalency rating, which will dictate what temporary and permanent housing you will be entitled to as well as your priority for air travel. The highest GS level is 15, though most contractors will fall into GS-8 through GS-12. GS-14 is the highest I have seen a contractor get and entitles you to low level VIP status including private accomodations and minor priority in air travel.

In the end, even if money is not your motivation, you have to pay attention to the money because that is how you will be evaluated and treated, and you need to be careful so you do not get yourself in financial difficulty by making a mistake in navigating the byzantine pay and tax issues.