Sixty days relief granted to foreigners trapped in US by COVID-19

The DoT and IRS released two revenue procedures on April 21, 2020, with the aim of providing tax relief to individuals who “did not anticipate meeting the ‘substantial presence test’…to become residents of the United States for federal income tax purposes during 2020.”

Under Revenue Procedure 2020-20, a taxpayer with up to 60 consecutive calendar days of US presence arising from disruptions caused by COVID-19 will not see those days counted as determining US tax residency. Similarly, nor will that period of time count towards determining whether the taxpayer qualifies for tax treaty benefits for income from personal services performed in the US.

Non-resident or foreign corporations can also qualify for the 60-day relief period. If they are conducting business activities that would not otherwise have been carried out in the US, those activities will not be counted for 60 days in determining whether they are engaged in a US trade or have a US permanent establishment.

Under Revenue Procedure 2020-27, relief is granted to qualified individuals who elect to exclude foreign-earned income from their gross income, “who reasonably expected to meet the eligibility requirements of section 911(d)(1) during 2019 or 2020, but failed to do so because the individual departed a foreign country on or after a specified date”. A qualified individual is defined as one whose tax home is a foreign county, and who is either a US citizen but has been resident in a foreign country for at least a full tax year or a US citizen who is present in a foreign country during at least 330 full days during a period of 12 consecutive months.

The IRS is continuing to update its COVID-19 response as the situation evolves.

Sources

• IRS
• IRS (residency, PDF)
• IRS (exclusions, PDF)
• IRS (PE) (expired)
• Withersworldwide