Taxation & Estate Planning

COVID-19 RELIEF FOR NONRESIDENTS

By Charles Rubin

Nonresident alien individuals present in the U.S. for too many days in a calendar year may be classified as residents for federal income tax purposes under the substantial presence test. If such individuals are stuck in the U.S. due to medical conditions, those days of presence may be excluded in making the days computations pursuant to statutory provisions.

There are nonresident alien individuals who are in the U.S. during the current COVID-19 crises who are unable to leave due to travel bans and similar limitations, but not due to their own illness. It is uncertain whether the medical exception applies to them.

As a relief measure, the IRS has issued a Revenue Procedure that allows qualified individuals to exclude a single consecutive period of presence in the U.S. starting on or after February 1, 2020 and ending on or before April 1, 2020 from their days present under the substantial presence test. Such individuals do not have to show they are actually stuck here due to COVID-19 - that is presumed.

Eligible persons do not include persons who were a U.S. resident for federal income tax purposes at the close of the 2019 tax year, or who are a lawful permanent resident at any point in time in 2020.

To obtain the exclusion, eligible individuals who need to file a Form 1040-NR for 2020 must include a Form 8843 to their timely filed return, which includes the information described in the Revenue Procedure. If the individual does not need to file a Form 1040-NR for 2020, then no Form 8843 is required, but such individuals are advised to retain documentation establishing their qualification for the exclusion of days.

Perhaps the April 1, 2020 ending date may be extended through April or beyond, based on events occurring subsequent to the date of the Revenue Procedure.

If an individual uses the procedure, they can also exclude other days if eligible under the medical exception or other exceptions if they qualify for them.

The consecutive days of presence requirement appears to prevent aggregating multiple stays in the U.S. during the exclusion period if the individual is in the U.S., leaves, and then returns.

On a related note, the U.S. Citizenship and Immigration Services is also providing relief relating to COVID-19, including for extensions of stay under visas (which may need to be applied for). See information on that here.

Revenue Procedure 2020-20 (April 21, 2020)

Full post as published by Rubin on Tax on April 22, 2020 (boomark / email).