Monthly Archives: April 2020

Foreign Earned Income Exclusion and Covid-19

 
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Covid-19 has caused a global health emergency and is an ‘adverse condition’  meriting relief for individuals that reasonably expected to become a “qualified individual” for purposes of claiming the foreign earned income exclusion, FEIE, under IRC section 911, but left the foreign jurisdiction during the period described in Revenue Procedure 2020-27.

Do read the revenue procedure carefully if you think this may apply to you!

There may be things you need to do later in 2020 for this to be available to you.

Rev. Proc, 2020-27 will be published in Internal Revenue Bulletin 2020-20 to be issued on May 11, 2020

Substantial Presence Test, Treaty Income Exclusion and Covid-19

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IRS has issued a revenue procedure that allows the use of the medical condition exception on Form 8843 to except 60 consecutive days spent in the U.S.  from counting towards presence in the U.S.  during the “COVID-19 Emergency Period”. The sixty-day time period that may be excepted may start on a date of the individual’s choice during a time period between February 1, 2020, and on or before April 1, 2020.

The same procedure provides for an individual to exclude those days of presence in order to claim benefits under an income tax treaty with respect to services income.

This revenue procedure, Rev. Proc. 2020-20 will be published in Internal Revenue Bulletin to be issued on May 11, 2020.

This might affect withholding for 2020, the income tax form to be filed for 2020 (1040NR or 1040).  As appropriate, individuals may want to adjust their tax planning and notify employers. Some individuals are eager to meet the SPT and file on Form 1040, others prefer not to become tax residents filing on Form 1040 any sooner than required.