IRS issues guidance for taxpayers living abroad

Tax Hot Topics newsletter The IRS recently issued Rev. Proc. 2020-14 to provide guidance to U.S. taxpayers living abroad, including some information relevant to individuals for their 2019 federal tax return.

U.S. taxpayers working overseas remain subject to federal taxation on their worldwide income. One mechanism to mitigate federal taxation on overseas earnings is to claim the Foreign Earned Income Exclusion and Foreign Housing Exclusion on Form 2555 in an annual tax return.

Individuals with a tax home overseas and who qualify under either the bona fide resident test or physical presence test can exclude up to $105,900 of income from their 2019 federal taxable income.

Taxpayers who may otherwise qualify under these tests but must leave a foreign country because of adverse circumstances, such as war and civil unrest, may have the time requirements waived. Revenue Procedure 2020-14 identified the following as countries where this time waiver applies for 2019 tax filings with dates of departure on or after:

  • Democratic Republic of Congo – Jan. 13, 2019
  • Haiti – Feb. 14, 2019
  • Iraq – May 14, 2019
  • Sudan – April 11, 2019
  • Venezuela – Jan. 24, 2019

U.S. taxpayers working overseas should review whether the guidance impacts their 2019 taxes and filings and plan accordingly.

The IRS also notes they are monitoring developments arising from COVID-19 and may issue guidance for 2020 tax filings in due course.

Richard Tonge
Manhattan Office
T +1 202 861 4144

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