Because of disruptions caused by the global COVID-19 pandemic, many foreign nationals who normally reside abroad, as well as U.S. citizens intending to live elsewhere, have found themselves stuck here. While federal tax law might be the farthest thing from many people’s minds as they hunker down during a worldwide public health crisis, the amount of time international travelers spend in the U.S. directly affects their tax obligations. The IRS has issued guidance regarding waivers and exemptions for international travelers who might inadvertently incur tax obligations or lose tax benefits.
Avoiding Accidental U.S. Residency
The tax liability of individuals in the U.S. who are not U.S. citizens or permanent residents depends on whether they are resident or nonresident aliens. Resident aliens must pay federal income tax in much the same manner as U.S. citizens. A person can become a resident alien if they meet the “substantial presence test” described in § 7701(b)(3) of the Internal Revenue Code (IRC):
– They have been in the U.S. for at least 31 days during the current calendar year; and
– The sum of the number of days present in the current year, one-third of the days present in the preceding year, and one-sixth of the days in the year before that is at least 183.
The IRS is granting Medical Condition Exceptions to people who “intended to leave…but [were] unable to do so because of a medical condition” that kept them here. Up to sixty days spent in the U.S. due to “COVID-19 Emergency Travel Disruptions” will not count towards the total used to determine resident alien status.