COVID-19 impacted the whole world badly in general and USA in particular. Due to this unprecedented situation where normal travelling and flight operations has been suspended across the globe, many countries taking special measures for immediate return of their citizens to their homeland. This situation forces the US citizens to return USA who otherwise expected to remain abroad to meet the Foreign Earned Income Exclusion IFEF requirements. In purview of this IRS relaxed rules under certain conditions by expanding range of qualifying events for FEIE during 2019 and 2020 so that such US citizens can qualify for FEIE.

US citizens who left China and spent their time in US between Dec 1, 2019 and Jul 15, 2020, can add now this duration in their qualifying period for FEIF. This means that you can still qualify as a legitimate resident and physically present if you left China between December 1, 2019 and July 15, 2020, as you expected to be to qualify if there is no COVID-19 emergency.

The IRS normally allowed such waivers for FEIE in case of war, civil unrest, or similar adverse conditions. As COVID-19 pandemic is now declared an adverse condition qualifying for a waiver of time to meet the physical presence test.

The period for this waiver will end on July 15, 2020. However IRS or Treasury may extend this time by considering the prolong events of pandemic but are not known right now.

EXAMPLE

Mr. Jhon, a US citizen, arrived in Hong Kong on Aug 1, 2019 contractual job signed through Dec 2020, with possibility of extension.

Under normal circumstances, the earliest time (12 month period) he would qualify for the foreign earned income exclusion is July 31, 2020, but because of the COVID-19 pandemic, his employment ceased and he returned to the US on March 31, 2020.

In this case he may claim the waiver of the physical presence requirements and take the Foreign Earned Income Exclusion (FEIE) for 8 months of work abroad. He can establish a reasonable expectation (job contract) that he would have met the physical presence test if there is no COVID-19 emergency.