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Foreign Earned Income Exclusion Time Requirements Waived Due to COVID-19 IRS Revenue Procedure 2020-27

Posted on 04/28/20

Dear Professional Friends of Kerkering Barberio & Co:

Danielle Logan (), Kerkering Barberio International Tax Manager, brings you this information on recently issued IRS Revenue Procedure 2020-27. In response to COVID-19, the Internal Revenue Service has provided relief under the Foreign Earned Income Exclusion [“FEIE”] to U.S. taxpayers living and working abroad with foreign earned income.  For tax years 2019 and 2020, IRS has provided a waiver of the time requirements a taxpayer needs to meet the bona fide residence or physical presence test to receive FEIE benefits.  A taxpayer can qualify for relief if the taxpayer: 

1) Was otherwise a qualified individual under FEIE rules,

2) Reasonably expected to have met the residence or presence tests but for the COVID-19 emergency, and

3) Established in a foreign country the residence or presence tests on or before the dates mentioned below:

  • People’s Republic of China [excludes the Special Administrative Regions of Hong Kong and Macau (China)] effective December 1, 2019 through July 15, 2020, and
  • Globally effective February 1, 2020 through July 15, 2020.

As an example, if a taxpayer arrived in China on September 1, 2019 and reasonably expected to work in China until September 1, 2020 but had to depart on January 10, 2020 due to the COVID-19 emergency, the taxpayer would still be eligible for the FEIE assuming the other required qualifications were met.  The taxpayer would qualify for tax period September 1, 2019 through December 31, 2019 and from January 1, through January 9, 2020.

As another example, assume a taxpayer was present in the United Kingdom on January 1, 2020 and reasonably expected to work in the United Kingdom for the full calendar year but had to depart on March 2, 2020 due to the COVID-19 emergency. The taxpayer was able to return to the United Kingdom on August 25, 2020 for the remainder of the 2020 year. The taxpayer would still be eligible for the FEIE assuming the other required qualifications were met. The taxpayer would qualify for tax year 2020 based on periods January 1 through March 1, 2020 and from August 25 through December 31, 2020.

The International Team at Kerkering Barberio includes professionals well-versed in international tax and related new regulations and forms. If you have any questions, please contact the Kerkering Barberio team at 941-365-4617 or visit our website at https://www.kbgrp.com/resources/covid-19-updates to see the latest resources. Please let us know how we can assist you or your clients. 

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