updated 2:57 PM CEST, Sep 21, 2023

Dems Abroad raises Child Tax Credit questions with U.S. Treasury Secretary, IRS Commissioner

The Democrats Abroad is formally seeking "clarity" from Treasury Secretary Janet Yellen and IRS Commissioner Charles Rettig about the eligibility of Americans living overseas for the newly-expanded Child Tax Credit, citing "confusion" over the matter.

The request for clarification came in the form of a forcefully-written letter, dated today and copied to 10 other Congressional officials, including House Speaker Nancy Pelosi, Senate Majority Leader Charles Schumer, Finance Committee Chairman Ron Wyden and Ranking Member Mike Crapo, and Americans Abroad Caucus co-chairs Carolyn Maloney and Dina Titus. 

As reported earlier this month,  IRS documents and a spokesperson for the IRS said most American expatriates with children under the age of 17 would not be eligible to receive expanded monthly Child Tax Credit payment amounts about to begin being provided under the Biden Administration's so-called American Rescue Plan, unless they had a main home in the U.S., in which they lived for at least half the year. 

Such expatriates would, though, normally be able to continue to receive the amount that has been available to them until now under the existing Child Tax Credit program, the IRS spokesperson said. The exact amount of CTC benefit an American taxpayer or taxpaying couple receives is dependent on their income, but for Homeland families the maximum benefit could be as much as US$3,600 per qualifying child under the age of 6, compared with US$2,000 previously.

The Democrats Abroad is the official overseas arm of the U.S. Democratic Party. Today's letter was signed off by Candice Kerestan, the Democrats Abroad's recently elected, Germany-based international chair, who succeeded Julia Bryan. 

In the letter, which has been posted via a link on the Democrats Abroad's website, the Democrats Abroad noted that what the organization called "ongoing concerns and frustrations of U.S. citizens abroad in obtaining support and service from the Treasury Department and the IRS" had reached "a new level in the IRS decision to deny American parents abroad access to the same Child Tax Credits (CTC) being provided to U.S.-based American parents".

However, the Democrats Abroad letter continued, the IRS guidance on the CTC had been "so poorly communicated" that even tax advisers the organization's representatives had consulted on the matter were unable to agree as to exactly "what part of the Enhanced CTC American parents abroad will be denied" to expat parents.

As a result, "we do not know whether it is the advance payments or the enhanced CTC itself," the letter adds. 

"This lack of clarity adds insult to injury. We respectfully request that the Treasury Department and the IRS urgently remedy these lapses in benefits and guidance, and also consider our recommendations for improving support to Americans living abroad."

The letter then quotes three key paragraphs from the IRS website, where it details how the expanded Child Tax Credit would work, which includes the following line: "Advance payments of the 2021 Child Tax Credit will be made regularly from July through December to eligible taxpayers who have a main home in the United States for more than half the year. 

"Democrats Abroad consulted tax return preparers servicing non-resident Americans and found disagreement on whether the U.S.-residency eligibility criterion (in bold above) relates solely to the advance payments or to the enhanced payments overall.

"There is also some confusion about whether the residency requirement relates to 2020 or 2021.

"If tax advisers who specialize in tax filings for non-resident citizens are uncertain, then American parents abroad preparing their own filings certainly will be.

"The exclusion of Americans abroad from this important family support program would be bad enough, but the language of the guidance is ambiguous and perplexing."

The letter goes on to request "urgent clarification of ARP [American Rescue Plan] Act CTC eligibility criteria and for the IRS to restore any deficiencies in benefits to American parents who live abroad." 

Failure of new IRS portal to accommodate
'non-U.S. addresses, phone numbers' predicted

A measure of the Democrats Abroad's apparent frustration with the IRS is evident where the organization's letter to Yellen and Rettig acknowledges that the IRS is planning to "launch a portal for parents to indicate whether they would like to receive 50% of the enhanced CTC as monthly payments or the whole CTC as a refund in their 2021 tax filing.

"Sadly," the letter continues, "we expect this portal to suffer from the same obtstacles to access for Americans abroad as those that plagued the IRS's Non-filers: Enter Information Here and Get My Payment portals. Those systems failed to recognize most non-U.S. addresses and accommodate non-U.S. phone numbers, both of which were essential to accessing the portals.

"Those few who were able to access the systems successfully found they were unable to enter non-U.S. bank account information, which caused substantial delays in the delivery of pandemic benefits." 

The letter continues in the same critical vein for a full additional page. It ends, in a sentence highlighted in bold type: "Further, we ask that the Treasury Department and the IRS show greater concern for the serious U.S. tax and reporting challenges citizens abroad face by acknowledging our situation and responding favorably (see addendum)."  

The addendum, which is also referred to in the first sentence of today's letter, is an earlier, five-page letter to Yellen and Rettig (and copied to the same 10 people as today's letter), dated March 3, and headed "Re: Improving IRS service to Americans living abroad". It may be accessed from this page of the Democrats Abroad website.

The Treasury Department and IRS have been contacted for comment.  

American Rescue Plan

The American Rescue Plan, which established the expanded Child Tax Credits benefits that are the subject of today's Democrats Abroad letter, is a US$1.9 trillion economic stimulus bill that was signed into law by President Biden back in March, as part of federal government efforts to help the U.S. recover from the economic impact of the Covid-19 pandemic, which shut down much of the U.S. economy for months in 2020 and 2021.