Taxation Attorneys Alan Granwell, William Sharp, Andrea Darling de Cortes and Alexander Olama co-authored an article published by Tax Notes
analyzing new guidance issued by the Internal Revenue Service (IRS) offering nonresident aliens (NRAs) stuck in the United States as a result of the COVID-19 pandemic a 60-day exemption from the substantial presence test for U.S. federal income tax. According to this test, these individuals may be classified as resident aliens subject to U.S. income tax if they 1) are present in the country for a least 31 days during the current calendar year and 2) if the sum of the days present in the current calendar year, 1/3 of the days present in the preceding calendar year, and 1/6 of the days present in the second preceding calendar year is at least 183. Travel restrictions have left many individuals stranded in the United States and concerned that they would consequently be subject to income tax. The new guidance allows NRAs to exclude 60 days during the period between Feb 1, 2020, and April 1, 2020, when determining their total days present, and this new exemption may be used with already-existing exceptions such as the medical condition and closer connection exceptions. The article describes the new exception, explains how it will be applied and how it will interact with other exceptions, and summarizes five related FAQs released by the IRS.
READ: IRS Provides COVID-19 Emergency Relief to NRAs Stranded in the United States