As lawyers representing plaintiffs in a number of U.S. states prepare to bring legal challenges against the U.S. government and key government officials for denying certain American taxpayers the right to receive CARES Act "Economic Impact Payments" because they most recently have been filing their tax returns jointly with their non-American citizen spouses, reports have emerged of renounced Americans as well as foreign workers living overseas getting the payments.
The report that "thousands of foreign workers, many living overseas" have been receiving the stimulus checks was published earlier this month by the Politico.com website.
It noted that the stimulus checks had been sent in error "due to an unforeseen glitch" in the system that was used to choose who received the payments.
Specifically, the Politico.com article noted, a "common tax-filing blunder" saw foreign workers who had been in the U.S. on F-1 student and J-1 exchage visas, to study at U.S. universities, had worked summer jobs in the States, and often turned to TurboTax and other e-filing systems "without knowing that the systems are designed only for U.S. residents", and that as a result, "many temporary foreign workers each year file the wrong tax forms".
The IRS rarely catches these errors "because non-immigrant workers' Social Security numbers have the same number of digits as those of U.S. citizens, and therefore appear to be identical", the article adds, citing accountants who had been interviewed.
"Usually the error doesn't much matter, but this year it's causing the IRS to think certain foreign workers are eligible for one-time stimulus payments."
The article goes on to note that the students who had received these payments were all "motivated to return the money out of fear they would be banned from receiving visas in the future – or worse, deported – if the government learned they had committed tax fraud".
However, many of those trying to return the money or alert the autorities as to what had happened said they struggled to find anyone to talk to.
Renounced American citizens
receive CARES Act payments
In a separate but seemingly-related manner, at least three individuals who formally renounced their U.S. citizenships more than two years ago, have reported receiving the CARES Act stimulus payents, even though they also did not request them. It is thought there could be many others like them.
The former Americans, who are now living outside the United States as citizens of other countries, have asked that they not be identified. They also say they have no intention of cashing the checks.
However, they flagged up the matter recently, because they didn't understand why they had received the checks, according to John Richardson, a citizenship lawyer and renunciation expert who is based in Toronto, who said he had personally been informed of all three of the erroneous payments, which he noted had been made to individuals resident in two different countries.
All three "believed that their receiving the checks must have been a mistake," Richardson told the American Expat Financial News Journal today.
"They said they have absolutely no intention of cashing the checks."
Richardson, pictured left, who in recent years has been an outspoken critic of the U.S. system of taxing its expats, added: "This is really a sad situation, and shows why the United States should not be delivering COVID-19 benefits through its tax system.
"The toxic mix of imposing worldwide taxation on US citizens living outside the United States, tying relief to having a Social Security Number, and then administering the whole apparatus through the tax system, has resulted in this shocking situation, in which you have individuals living outside of the U.S., who renounced their U.S. citizenships, receiving COVID-19 benefit checks – even as many U.S. resident American citizens are being denied the same benefits simply because they jointly filed their U.S. tax returns with spouses who happen not to have Social Security Numbers, even though in some cases they actually do have a so-called Individual Taxpayer Identification Number (ITIN).
"As I see it, this is yet another example of the unfairness and unintended consequences that too often occur whenever the U.S. tries to impose its tax rules on people who don't live in the United States."
Officials from the U.S. Treasury Department didn't immediately respond to a request for comment.
Since this article was originally published, a fourth American who renounced her citizenship in 2018, and who has also received an economic stimulus check, came forward.
"My 2018 return was my final return, so it should have been clear to the IRS that I am a non-resident alien, and not eligible for the stimulus payment," the former American, who requested anonymity, told the American Expat Financial News Journal.
"I find it upsetting that so many U.S. residents who need this money have not received it yet, while cheques are turning up un-announced at the doors of non-U.S. citizens like me, who have been living outside of the U.S. for decades, and are already receiving relief from our own governments where we live.
"This highlights the huge problems with the United States' bizarre system of non-resident taxation."
As reported here last month, at least three lawsuits are known to have been filed thus far in connection with the fact that the “Economic Impact Payments” the U.S. is currently in the process of distributing to U.S. citizens, including expats, in an effort to help the U.S. economy to weather the Covid-19 pandemic-caused economic downturn, are being withheld from a sub-group of Americans who have been filing their tax returns jointly with spouses who aren’t American and who lack Social Security numbers.
The one-off impact payments are worth up to US$1,200, and are being made to U.S. citizens as part of a US$2trn stimulus package that was signed into law by President Trump in March.
Some observers believe at least one more stimulus package is likely to be introduced, given the scale of the hit the American economy is taking from the coronavirus crisis, which shows no sign of stabilizing yet.
Meanwhile, since the Coronavirus Aid Relief and Economic Security (CARES) Act package went live, in addition to spouses of immigrants and other non-Americans who lack Social Security numbers being unable to access the stimulus money, Americans at home as well abroad who understood themselves to be eligible for it have been reporting major problems in their attempts to apply for it. The IRS has said it is working non-stop to address these issues.
How to return an Economic
Impact Payment sent in error
Since this article was initially published, sources have pointed out instructions for returning an erroneously-sent Economic Impact Payment on the IRS's website. To view them, click here, and scroll to the bottom.
A version of these instructions may be seen below.
Also since this article was published, John Richardson, who is quoted above, has hosted an online podcast on the topic, in which he discusses it with four American expatriates based in Canada, Australia and France who are active in American expat issues. To listen to and download the podcast, which lasts about 20 minutes, click here.
- Latest ACA TaxCast: Marylouise Serrato provides status update on Economic Impact Payments
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- Surprise stimulus payment advantage for expats spotted, via Foreign Earned Income Exclusion