With the rapid spread of Covid-19 many countries including the United States responded by restricting travel and imposing lockdowns. This has led to some travellers becoming stranded in the US for a much longer period than they had originally intended when they arrived in the US. These extended stays in the US could bring with them US tax residency issues and an obligation to report income in the United States which would not have otherwise been reportable to the Internal Revenue Service (IRS).
The Treasury Department and IRS have now issued guidance to assist those non US citizens who are unfortunately caught in this situation. Most will now have an additional 60 days that they can be resident in the United States in 2020 without becoming US residents. Revenue Procedure 2020-20 allows an eligible individual to exclude up to an additional 60 days of continuous presence in the US from their day count under the substantial presence test (see below). The period of continuous US presence claimed should commence between 1 February and 1 April 2020.
A non US citizen or permanent resident is usually considered a United States Resident for tax purposes if they have met the following tests, known as the substantial presence test:
- They are resident for 31 days in the current year
- They are resident for 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.
Based on the above a non US Citizen could spend up to 242 days in the United States in 2020 but they should carefully review their time spent in the UNITED States both in the current year and previous 2 years.
If you are affected by these issues or would like to discuss further please contact Tax Advisory Partnership to discuss you United States tax residency issues.
