On March 27, 2020, after a week of intense negotiation between the Democrat-controlled House of Representative and the Republican-controlled Senate, President Trump signed the $2 trillion “Coronavirus Aid, Relief, and Economic Security Act”—the “CARES Act”, for short (got to love Congress and their acronym obsession)—into law. The law provides for multiple forms of relief to Americans and the economy at large, including $250 billion in extended unemployment insurance, $100 billion for hospitals, $150 billion for state governments, an additional $20 billion for farm bailouts, free Coronavirus tests (you know, assuming anyone can find any), and $500 billion for corporate help.
However, that’s not what concerns US expats. If you’re reading this, you want to know about the economic stimulus payments everyone is suddenly talking about. Are US expats eligible? What are the requirements? And, most importantly—how much am I getting?
Eligibility for the Stimulus Payments
First of all, all American citizens and green card holders who have filed a tax return in either 2018 or 2019 are eligible for payments. This includes US expats. Nonresident aliens and people without Social Security numbers are not eligible. People who are claimed as dependents on another’s return are also not eligible.
If you haven’t filed either year, the IRS will send the check after the returns are filed. If your only income was from social security payments and you weren’t required to file a return, the IRS will use information from the Social Security Administration to calculate your stimulus payment. If you didn’t have a filing requirement for either 2018 or 2019, you can claim the stimulus by filing a 2020 return next year.
The most important thing to remember is: you do not need to do not need to do anything to claim your stimulus payment. Everything will happen automatically as long as you have filed a tax return.
Amount of the Stimulus Payments
The stimulus payment is $1,200 per adult and $500 per child under the age of 17 (same rules as the Child Tax Credit). People who earned more than $75,000 ($150,000 for married couples filing jointly; $112,500 for heads of households) in both 2018 and 2019 will see their payments reduced by $50 per $1,000 in income over the threshold. If you receive a reduced payment because of high income but earned under the threshold in 2020, the amount will be added to your 2020 tax return as a refundable credit. Conversely, taxpayers will not be penalized if they end up making more than the threshold in 2020.
Method and Timing of the Stimulus Payments
The Treasury will make the payments via direct deposit to people who included their bank account information in their 2018 or 2019 returns. Everyone else will be mailed a paper check to the address on their most recent return.
The Treasury plans to start issuing payments in April, and they guarantee that the payments will be complete by December 31.
Eligible taxpayers should receive a letter before they receive their payment—but the vagaries of international mail (as well as the quality of snail mail in many countries) will almost definitely result in many US expats receiving their direct deposits into their US accounts well before they receive any paper letter in the mail.
Other Provisions of the CARES Act
The CARES Act includes a bunch of other provisions to help Americans through the economic pressures of the coronavirus pandemic. Here is a lightning-round-style roundup of the rest of the highlights:
Self-employed individuals can defer part of their self-employment tax bill to 2021 or 2022.
You can take early distributions from your IRA or 401(k) plan for coronavirus-related expenses without the normal 10% penalty, and you can defer the tax payments for three years (or repay the distribution within three years to avoid penalties).
The requirement to take minimum distributions (RMDs) from IRAs for taxpayers aged 72 and older has been waived.
What If I Haven’t Filed?
If you are a US expat with a filing requirement and you have fallen behind on your tax returns, you may want to consider one of the IRS’s amnesty programs to get caught up, if you are eligible. If the only returns you haven’t filed were 2018 and/or 2019, you can contact us to find out about our regular tax filing rates.
Stay well, stay safe, and stay inside! We’ll be back to our regularly scheduled programming soon.