COVID-19 has unmistakably taken its toll over the world, regardless of one's financial situation. To stop the virus from spreading, governments adopted varying degrees of inbound and outward travel restrictions. The United States, like any other country, was confronted with stranded foreign people whose US expat tax return status is determined by their residency status, which is generally determined by their physical presence in the United States.
A general rule governs tax residency in the United States.
In the United States, Federal tax for non residents is taxed based on their resident status. Residents are taxed on their worldwide income, whereas non-residents are only taxed on income earned in the United States.
Suppose a foreign person who is not a lawful permanent resident (i.e., a green card holder) fulfills the substantial presence test (SPT) for the calendar year. In that case, he will be categorized as a resident alien under US tax regulations unless an exception exists. When the SPT is met,
1. an individual has spent at least 31 days in the United States during the current calendar year, and
2. has spent at least 183 days in the United States, as determined by the two-year lookback rule.
There are some exceptions to the many presence rules.
When applying for SPT, a day of physical presence in the United States is usually counted. However, foreign nationals may take advantage of exceptions when calculating a day in the United States, one of which is the medical condition exception. This refers to times when a person could not leave the country due to a medical problem that developed while they were in the country.
The IRS issued RP 2020-20 based on the medical condition exception, allowing eligible persons to disregard their COVID-19 emergency period when calculating their days in the US.
An emergency period for US expat taxes is defined in Section 3 of the procedure as a single period of up to 60 consecutive calendar days selected by an eligible individual beginning on or after February and ending on April 1, 2020. A qualified person is described as follows:
• At the end of 2019, you were not a resident of the United States;
• At any moment in 2020, you will not be a lawful permanent residence;
• He was in the United States every day of his COVID-19 emergency period; and
• Due to the number of days spent in the US after considering this procedure, he does not become a US resident in 2020.
Administrative necessities
To claim the COVID-19 medical condition travel exception, eligible people who are obliged to submit an income tax return (Form 1040-NR) must attach Form 8843 (Statement for Exempt Individuals and Individuals with a Medical Condition), taking into account RP 2020-20. It is not necessary to provide a physician's statement. Instead, the individual's emergency period's start and end dates must be specified. Those who are not required to file Form 1040NR, on the other hand, do not need to file Form 8843 to claim the exception. They must, however, save any necessary records from supporting their claim under this approach and returning them to the IRS, along with the completed Form 8843, when requested.
Every year, many taxpayers find themselves in big trouble when it comes to paying the tax return on time.
Go through some good tax site and e-file services to get ideas as to how to file tax online.When you are busy with other tasks and in such situations, preparing and tax filing for US citizens living abroad can be a tough job if you still cling to the traditional paper filing method.
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