Form 8843 & Instructions 2020: The Form 8843 instructions can be complex. The IRS allows some foreigners who meet the substantial presence test (SPT) to claim an exemption to U.S. tax on worldwide income. The form is different than form 8840, which is used to show a closer connection. Generally, foreigners are not subject to U.S. tax on worldwide income. But, if the person qualifies under SPT, they become subject to tax and reporting on their worldwide income and assets. In recent years, the IRS has taken an aggressive position toward foreign accounts compliance — with a focus on reporting offshore accounts, assets, investments, and income. This may result in significant fines and penalties. The Internal Revenue Service has also developed various amnesty programs, collectively referred to as offshore voluntary disclosure.
Form 8843 & Instructions
The Form 8843 instructions are complicated.
The IRS 8843 Form is due to be filed at the same time the individual files the form 1040 NR. The 1040 NR is for “non-residents” as opposed to the 1040, which is for citizens, green card holders, and individuals who meet the substantial presence test. Even if a person does not file the form 1040NR, they would still send the form to the IRS by the due date for filing from 1040-NR (including extensions).
Department of the Treasury
Internal Revenue Service Center
Austin, TX 73301-0215
Who is an Exempt Individual?
The IRS instructions for Form 8843 summarizes who qualifies as an exempt individual.
Briefly, they include:
-A teacher or trainee.
-A professional athlete temporarily present in the United States to compete in a charitable sports event. The term exempt individual also includes an individual temporarily present in the United States as a foreign government-related individual under an “A” or “G” visa, other than individuals holding “A-3” or “G-5” class visas.
-An individual present under an “A-3” or “G-5” class visa is not considered a foreign government-related individual and must count all his or her days of presence in the United States for purposes of the substantial presence test.
Foreign Person with a Medical Condition
In addition to meeting the above-referenced exemptions, certain individuals with medical conditions may also qualify as exempt.
Typically, the IRS will exclude any days in which the person wanted to leave but was rendered unable to leave the country because of a medical condition or medical problem that arose while you were in the United States.
The U.S. utilizes a totality of the circumstances test, which is detailed further in Publication 519.
But, the following circumstances will not qualify toward being medically exempt:
– You were initially prevented from leaving, were then able to leave, but remained in the United States beyond a reasonable period for making arrangements to leave.
– You entered or returned to the United States for medical treatment. It does not matter whether you intended to leave the United States immediately after the medical treatment but couldn’t do so because of unforeseen complications from the medical treatment.
– The medical condition existed before your arrival in the United States and you were aware of the condition. It does not matter whether you needed treatment for the condition when you entered the United States. Paperwork Reduction Act Notice.
Penalty for Not Filing Form 8843
As provided by the IRS:
If you don’t file Form 8843 on time, you may not exclude the days you were present in the United States as a professional athlete or because of a medical condition or medical problem that arose while you were in the United States.
Failure to exclude days of presence in the United States could result in your being considered a U.S. resident under the substantial presence test.
How to Avoid an 8843 Penalty
As further provided by the IRS:
You won’t be penalized if you can show by clear and convincing evidence that you took reasonable actions to become aware of the filing requirements and significant steps to comply with those requirements.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.
Each case is led by a Board-Certified Tax Law Specialist with 20 years of experience, and the entire matter (tax and legal) is handled by our team, in-house.
*Please beware of copycat tax and law firms misleading the public about their credentials and experience.
Less than 1% of Tax Attorneys Nationwide Are Certified Specialists
Sean M. Golding is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.
Recent Golding & Golding Case Highlights
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
- We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
- We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
- We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
How to Hire Experienced FBAR Counsel?
Generally, experienced attorneys in this field will have the following credentials/experience:
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
Interested in Learning More about Golding & Golding?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
Golding & Golding specializes in FBAR and FATCA. Contact our firm today for assistance with getting compliant.