As Americans who have been resident abroad for years know only too well, when the IRS has news for U.S. expats, it's usually not good. However, as the American Expat Financial News Journal and other media organizations reported last month, the U.S. government actually included Americans who are resident overseas among those U.S. citizens who would be potentially eligible to receive a "recovery rebate" check, as part of a US$2.2 trillion bipartisan bill aimed at providing emergency relief to individuals and businesses hit by the coronavirus pandemic lockdown...
Here, Bright!Tax partner and managing Certified Public Accountant Allyson Lindsey details what American expats need to know about getting their COVID-19 rebate checks, and where they can go to find further and updated information...
While it's true that U.S. expats normally get the short straw when it comes to new IRS rules, as noted above, many actually stand to benefit financially this time.
And the news that they stand to benefit from the recently-announced U.S. relief package could hardly have come at a more opportune time for many American expatriates around the world, who are currently struggling financially, due to the measures that are being taken by the governments of the countries in which they live to limit the spread of COVID-19.
As reported, the recently passed CARES (Coronavirus Aid, Relief and Economic Security) Act actually includes expat U.S. citizens among those potentially eligible to receive an economic impact payment.
Because Americans resident outside of the U.S. weren’t originally included in the first draft of the law, it came as something of a welcome surprise to many observers – not to mention American expats themselves – when they made it into the final version.
Known as a "Recovery Rebate" in the law, and as "Economic Impact Payments" by the IRS, the stimulus check is worth a maximum of US$1,200 per eligible adult (thus US$2,400 for married couples who file jointly). Parents are also eligible to receive an additional US$500 for each qualifying child – that is, children under 17 who are claimed as dependents.
So an American married couple who file jointly and live in the UK with three dependent children under the age of 17 could receive US$3,900.
Of course, there are conditions. All recipients must, for example, have a U.S. Social Security number.
Also, in order to be eligible to receive an automatic Recovery Rebate check, expats must be up-to-date with their U.S. taxes. As this year’s filing deadline has been extended to July 15, for all U.S. taxpayers including expats, this means they would need to have filed their 2018 tax returns.
(Those otherwise-eligible U.S. citizens who didn't file returns because they had gross income that didn't exceed US$12,000 (or US$24,000 for married couples, or who otherwise weren't required to file a federal income tax return for 2019 and therefore hadn't planned to, are able to apply for the payment by using what the IRS calls its "Non-Filers: Enter Payment Info Here" tool.)
How much individuals stand to receive will depend on their annual income. Expats whose adjusted gross income on their most recently filed Form 1040 (so, for either 2018 or 2019) is is up to US$75,000 (US$150,000 for married couples) will receive the full payment amount (US$1,200 for individuals, US$2,400 for married couples filing jointly).
Above these thresholds, the amount they are eligible to receive slowly reduces, until it phases out entirely at an annual income level of US$99,000 or more (US$198,000 for couples).
Getting the check
Expats (along with Americans residing in the States) who provided U.S. bank account details on their last tax return will, as mentioned above, automatically receive the payment by direct deposit.
Those who didn’t can use one of two new IRS online tools to provide US bank details. Otherwise, the IRS will mail a check.
Many expats will prefer to be paid by direct deposit rather than being mailed by check, as they may not have confidence in the postal system in the country where they currently live.
Whether expats should provide their bank details using one of the new IRS online tools for this purpose – and if so, which one – will necessarily depend on their circumstances.
The two tools are called Get My Payments, and, as noted above, Non-Filers: Enter Payment Info Here.
A good link on the IRS website to these may be found by clicking here.
Worth noting is that any expat Americans whose only income is U.S. Social Security, Disability, Railroad or Survivor benefits, and who have no dependents under the age of 17, don’t need to use either tool, as they will receive their payments automatically.
Those whose only income is these benefits but who have dependent children under age 17 should use the Non-Filers tool to provide the URS with a U.S. bank account, along with any expats who earn under the minimum filing thresholds.
These were US$12,000 in 2018, and US$12,200 in 2019, or just US$400 of self-employment income; or, for expats who are married but file separately (i.e., most expats married to a foreign spouse) just US$5!
These thresholds apply to global rather than just U.S. income.
Those expats whose income exceeds the minimum filing thresholds and who are up to date with their U.S. taxes, but who haven’t provided a U.S. bank account on their last tax return, should use the Get My Payment tool to provide their U.S. bank account details as soon as possible, to ensure that they aren’t automatically mailed a check.
Those who have provided the IRS with a bank account on their tax return can also use the Get My Payment tool, as it will let them know when their deposit is due to be made.
Word of caution
for some non-filers
One word of caution here: The Non-Filers tool should not be used by expats who should have been filing U.S. taxes, but haven’t been. This would be a major error, as it would alert the IRS to the fact that they haven’t been filing previously, in a way that could open them up to significant back taxes and penalties.
Neither should these expats just file a 2019 tax return if they haven’t filed one in previous years (and should have), as this would lead to the same result.
Instead, to get the Recovery Rebate payment and provide the IRS with bank details, any Americans resident abroad who have not been filing U.S. tax returns should seek expert advice, as there are IRS amnesty programs available, such as the Streamlined Procedure.
Options for expats
with no U.S. bank account
Many expats who have lived abroad for some time, and who no longer have a U.S. address, struggle to maintain a U.S. bank account. For this reason, as reported, such groups as the Democrats Abroad have urged Congress and the Treasury to make it possible for the IRS to make payments directly into expats' foreign bank accounts, noting that the U.S. Social Security Administration is able to do this without apparent problems.
Another option is to open a State Department Federal Credit Union (SDFCU) account, through a scheme that operates through the American Citizens Abroad, a Rockville, Maryland-based advocacy organization. In a similar way, Bright!Tax clients can apply to open a United Nations Federal Credit Union (UNFCU) account, about which details may be found by clicking here.
Allyson Lindsey is a partner and managing Certified Public Accountant at Bright!Tax, an online global provider of U.S. tax advice and services for expatriate Americans around the world. Those wishing to stay on top of coronavirus developments from a tax perspective can check out Bright!Tax's Coronavirus News webpage. They can also check out the Economic Impact Payment Information Center page of the IRS's website, by clicking here.
The views expressed above are for general information purposes only, and should not be construed as recommendations or advice for any individual, nor should any action be taken on account of the information presented. Further information may be obtained by contacting Bright!Tax at https://brighttax.com.
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