The Latest in Tax News: March 2020 Edition

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Textbook Tax presents its monthly tax news update. A quick read discussing various tax news, tax stories, and tax events trending in the world of tax during the month. The following tax topics cover the month of March 2020. The tax topics presented represent my favorites in tax news and tax-related events. Please comment any tax news stories you found interesting for the month of March. Additionally, please email me or connect with me on social media for the monthly tax news update sent straight to you!

Related Posts -- Prior Weeks' Tax News

COVID-19 News 

Tax News for March 2020

Tax Topic: Stranded foreign visitors may be subject to U.S. taxes

Tax Story Summary:

  • Foreign citizens are stuck in the U.S. because of international travel restrictions. These foreign individuals are unable to return home, which may result in them involuntarily becoming U.S. taxpayers.
  • Under U.S. tax law, foreign individuals living in the U.S. for 183 days or more have to report and potentially pay U.S. taxes on their worldwide incomes.
    • The 183 day residence threshold amounts is referred to as the substantial presence test.
  • IRC Section 7701 provides that foreign individuals who are unable to return to their home countries have to file forms with the IRS explaining the reason for remaining in the U.S.
  • Concerns over this rule are growing as the spread of COVID-19 continues to limit and restrict international travel.

Tax Topic: U.S. Tax Filing Due Date Extended

Tax Story Summary: 

  • U.S. Federal tax filing due date automatically extended from April 15 to July 15.
  • Notice 2020-18, which superseded and restated its earlier Notice 2020-17, provided timely filing relief to "affected taxpayers".
  • Affected taxpayers include any individuals with a tax return filing due date of April 15.
  • The due date for your Federal tax return and tax payment is automatically extended to July 15, 2020.
    • The extension does not require the typical tax extension forms.
  • No penalties, interest, or additional tax will accrue during the period of automatic extension from April 15 through July 15.
  • Please see my post detailing how Notice 2020-18 will affect you (Link).

Tax Topic: Concern about tax planning for companies with sudden losses

Tax Story Summary:

  • The economic shutdown caused by COVID-19 will create loss-allocation issues for multinational companies. 
  • Intercompany tax plan revision creates risk of disputes between government authorities.
  • Comparables, recent asset sales data for a similar asset, tend to be a lagging indicator.
  • These multinational companies will be forced to allocate losses to foreign entities, which will require the companies to convince the tax agencies that such losses are allocated at arm's length.
    • Previously, the transfer pricing methods based allocation on profits, which may not apply to many multinationals now experiencing sudden losses. 

That is all for the most recent tax news, tax stories, and tax events!

For any and all comments, please share below!