The US IRS on April 21 issued tax guidance explaining how the IRS will view an individual’s unexpected travel disruptions due to the COVID-19 emergency for purposes of the “substantial presence test” for US tax residency under section 7701(b)(3), the qualification for tax treaty benefits provided to services income, and the section 911 foreign earned income exclusion.
The guidance, Revenue Procedure 2020-20 and Rev. Procedure 2020-27 will be officially published by the US government on May 11.
Annoucing the new guidance, the Service said that Revenue Procedure 2020-20 provides relief to certain nonresident individuals who, but for COVID-19 emergency travel disruptions, would not have been in the United States long enough during 2020 to be considered resident aliens under the “substantial presence test” or be ineligible for treaty benefits on services income.
With respect to the relief provided under the substantial presence test, the revenue procedure establishes procedures to apply the substantial presence test medical condition exception to exclude up to 60 consecutive days spent in the United States during a time period starting on or after February 1, 2020, and on or before April 1, with the specific start date to be chosen by each individual, the Service said.
Revenue Procedure 2020-20 also provides procedures for an individual to exclude those days of presence in order to claim benefits under an income tax treaty with respect to services income.
The Service said that the Secretary of the Treasury has determined that the global health emergency caused by the outbreak of COVID-19 is an adverse condition that precludes the normal conduct of business globally.
Therefore, relief is provided under Rev. Procedure 2020-27 to any individual that reasonably expected to become a “qualified individual” for purposes of claiming the foreign earned income exclusion under section 911 but left the foreign jurisdiction during the period described in this revenue procedure, the IRS said.
Be the first to comment