If an individual is an alien (not a U.S. citizen), they are considered
a nonresident alien unless they meet one of two tests. They are a resident
alien of the United States for tax purposes if you meet either the green card
test or the substantial presence test for the calendar year (January 1-
December 31).
We will focus on the substantial presence test.
You will be considered a United States resident for tax purposes if you meet
the substantial presence test for the calendar year. To meet this test, you
must be physically present in the United States (U.S.) on at least:
- 31 days during the current year, and
- 183 days during the 3-year period that includes the current year and
the 2 years immediately before that, counting:
- All the days you were present in the current year, and
- 1/3 of the days you were present in the first year before the
current year, and - 1/6 of the days you were present in the second year before the
current year.
A person meeting the substantial presence test is required to file an income
tax return.
Individuals exempt from the substantial presence test include temporary
presence under the following visa’s; A or G class visas, a teacher or trainee
under J or Q visa, students under F, J, M or Q visa and a professional
athlete under in the US to compete in a charitable sports event.
COVID-19 emergency has caused travel related disruptions resulting in
foreign individuals who did not anticipate meeting the “substantial presence
test” under Code Sec. 7701(b)(3) to become U.S. residents for federal
income tax purposes during 2020, and may impact the individual’s
qualifications for certain treaty benefits.
To address this, Rev. Proc. 2020-20:
- Allows certain foreign individuals to claim a COVID-19 Medical
Condition Travel Exception to becoming U.S. residents; and - Provides similar relief for determining whether an individual (whether
an eligible for the medical travel exception) qualifies for U.S. income
tax treaty benefits for income from dependent personal services
performed in the United States.
Under the general medical condition exception to the substantial presence
test, an alien individual is not treated as present in the United States on
days when he or she intended to leave the U.S. but was unable to because
of a medical condition that arose while the individual was present in the
U.S. This does not apply, however, if the condition or problem existed
before the individual’s arrival in the U.S. and the individual was aware of the
condition or problem (Reg. §301.7701(b)-3(c)).
An individual is eligible to claim a COVID-19 Medical Condition Travel
Exception if he or she:
- was not a U.S. resident at the close of the 2019 tax year;
- is not a lawful permanent resident at any point in 2020;
- is present in the U.S. on each day of his or her COVID-19 Emergency
Period; and - does not become a U.S. resident in 2020 due to days of presence in
the United States outside of the individual’s COVID-19 Emergency
Period.
The COVID-19 Emergency Period is a single period of up to 60 consecutive
calendar days selected by an individual, starting on or after February 1,
2020, and on or before April 1, 2020, during which he or she is physically
present in the United States on each day.
An eligible individual who intended to leave the U.S. during his or her COVID-
19 Emergency Period but could not leave due to COVID-19 emergency travel
disruptions can exclude up to 60 calendar days of presence in the United
States for the substantial presence test. The COVID-19 emergency will be
considered a medical condition that prevented the individual from leaving
the United States on each day during his or her COVID-19 Emergency Period
and will not be treated as a pre-existing medical condition. Also, any days of
presence during the individual’s COVID-19 Emergency Period on which he or
she was unable to leave the United States due to COVID-19 emergency
travel disruptions will not be counted.
Eligible individuals who must file a Form 1040-NR, U.S. Nonresident Alien
Income Tax Return, for 2020 must claim the COVID-19 Medical Condition
Travel Exception by attaching Form 8843, Statement for Exempt Individuals
and Individuals with a Medical Condition, to their return by its due date (with
extensions) and mailing the forms to the address in the Form 1040-NR
instructions.
Eligible Individuals who are not required to file a 2020 Form 1040-NR are
not required to file Form 8843 to claim the exception but should retain all
relevant supporting records and be prepared to produce these records and
complete a Form 8843 if requested by the IRS.
For questions, please connect with Andrew Steinke at [email protected].