May 14, 2020

COVID-19 – A Case for Action #7 Pandemic Relief for US – Individual Tax Residency Test

This is part of a special Global Mobility Tax client alert series – sharing stories and situations we are encountering in these extraordinary times.

The COVID-19 global pandemic calls for quick action based on government directives in the interest of public health and safety. In this environment, arriving at practical mobility solutions can be challenging. Here’s how Global Mobility Tax has supported mobility programs in recent weeks: Action #7: Substantial Presence Test

Nonresident living in the United States had planned to leave the United States on March 1st and return home but due to shelter in place orders and canceled flights, has not been able to leave.

Revenue Procedure 2020-20 allows certain nonresident individuals who were not able to leave the United States due to COVID-19 pandemic to exclude up to 60 consecutive days of presence in the United States for purposes of determining US tax residence status using the substantial presence test.

ACTION: Revenue Procedure 2020-20 applies to certain nonresident individuals who were present in the United States within a specified time period starting on or after February 1st to on or before April 1, 2020. To take advantage of this relief, file form 8843 using the medical condition exception, along with 1040-NR.

IMPACT: A specific period of up to 60 consecutive calendar days spent in the US that starts on or after February 1st to April 1, 2020 can be excluded from the substantial presence test to determine U.S. residence status.

SAVINGS: U.S. tax can be eliminated on any non-U.S. sourced income earned during this period.

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