The CARES (Coronavirus, Aid, Relief and Economic Security) Act was passed on March 27th to provide financial assistance to American individuals and businesses affected by the Coronavirus outbreak.
Within the Act is a provision for a one-time stimulus payment to American individuals, including expats.
The stimulus payments are worth $1,200 per individual taxpayer, so $2,400 for married expats filing jointly (assuming that the spouse has a US social security number - read on for more about this).
Additionally, expats who have dependent children under the age of 17 that also have US social security numbers will receive an extra $500 per child.
The first criteria expats must meet to receive a stimulus payment relates to their adjusted gross income.
The law stipulates that Americans whose adjusted gross income on their last tax return (for 2019, or if they haven’t filed their 2019 return yet, for 2018) is under $75,000 will receive the full rebate. The amount is double for married expats filing jointly.
The amount paid is reduced by $5 for every $100 that an American’s adjusted gross income exceeds these thresholds, until it becomes zero at an adjusted gross income of $99,000 for individual filers, or $198,000 for married couples filing jointly.
Adjusted gross income is income after allowable adjustments.
The fact that payments are calculated based on adjusted gross income raises an interesting question for many expats - if they have reduced their taxable income to zero due to claiming the Foreign Earned Income Exclusion, are they still eligible for a stimulus payment?
The answer is yes - adjusted gross income is calculated after applying the Foreign Earned Income Exclusion, so an expat who earns even over $99,000 and who claims the Foreign Income Exclusion may receive a payment.
This isn’t the case for expats who claim the Foreign Tax Credit though, so some expats may prefer to claim the Foreign Earned Income Exclusion this year if they haven’t filed for 2019 yet, assuming both would reduce their US tax bill to zero, as they may then become eligible to receive a stimulus payment. (The devil is very much in the detail with regards to this though, and expats should seek professional advice to ensure that they file to their maximum benefit).
The other criteria for receiving a stimulus payment is having a US social security number, as already mentioned.
The CARES Act contains a strange anomaly though whereby if an expat is married to a foreign spouse that doesn’t have a US social security number, and the expat elects to file ‘married filing jointly’ rather than ‘married filing separately’, they will not receive any stimulus payment at all.
Very few expats file jointly with a foreign spouse who doesn’t have a US social security number, as it’s usually preferable to exclude a foreign spouse from the US tax system, however those that do aren’t currently due to receive a stimulus payment.
Stimulus checks are being paid automatically via direct deposit if the IRS has a person’s US bank account details.
The IRS already has US bank details of social security recipients, and of Americans who provided their bank details on their last tax return (for 2019, or if they haven’t filed it yet, 2018). Expats in one of these situations don’t need to do anything to receive their stimulus payment.
Expats who receive US social security benefits but have dependent children under the age of 17 can tell the IRS about their dependents (to receive the additional rebates) using an IRS online tool called Non-Filers: Enter Payment Info Here.
Expats who earn too little (worldwide) to have to file can also use this tool to provide the IRS with their US bank account details.
Expats who have filed their 2019 tax return (or at least their 2018 tax return) but didn’t provide their US bank details can use another IRS online tool called Get My Payment. This tool also tells them when their stimulus check will be paid.
Expats who haven’t filed either a 2018 or 2019 tax return shouldn’t use either of the above IRS online tools (and neither just file for 2019), but should instead seek advice regarding the best way for them to catch up and become compliant, perhaps under an IRS amnesty program such as the Streamlined Procedure. So long as they get compliant before October 15th, they will still receive a stimulus payment.
Expats who don’t have a US bank account will be mailed a check or a prepaid debit card, assuming the IRS has an address for them.
Almost all expats benefit from advice from a good US expat tax specialist, who will save them money by ensuring that they file in their best short and long term interests.
Bright!Tax is a leading, award-winning online provider of US tax services to Americans in over 190 countries worldwide.