By Olga Kocybik, CPA, Tax & Banking Committee Chair, AIWC Düsseldorf
I. Introduction
Millions of US citizens and US resident aliens including those living outside the United States (also referred to as international taxpayers, expatriates or expats) have already received, and are continuing to receive, their Economic Impact Payments as stimulus during the COVID-19 pandemic. This stimulus package, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, is the largest economic relief bill in U.S. history.
Eligible taxpayers who filed U.S. tax returns for either 2019 or 2018 will automatically receive their stimulus payment (currently $1,200 plus $500 for each qualifying dependent). For most taxpayers no further action is required. The Internal Revenue Service (IRS) will calculate the stimulus payment amount based on the taxpayer’s income, tax filing status and information on the taxpayer’s most recent tax return on file.
Those who receive US government benefits (listed in III. below) will receive their stimulus payment without the requirement to have filed either a 2019 or 2018 tax return.
Those with no or low income who are not required to file a tax return are also eligible for a stimulus payment but will need to follow special procedures (see IV.A. below).
And, to receive the stimulus payment, US citizens whose income was above the minimum income filing threshold limit but who have not in the last years filed a US tax return will first need to do so (see IV.B. below).
II. Eligibility
US citizens who have a valid US social security number and were not claimed as a dependent on someone else’s tax return are eligible for the stimulus payment.
The stimulus payment amount will depend on their income including, of course, also foreign earned income, as reported to the IRS on their 2019 income tax return; or, the income they reported on their 2018 return if their 2019 return has not yet been filed.
The payment is based on income thresholds summarized in the table below.
|
Filing Status |
Low Threshold |
High Threshold |
|
Single and Married Filing Separately |
Less than $75,000 |
$99,000 |
|
Married Filing Jointly |
Less than $150,000 |
$198,000 |
|
Head of Household |
Less than $112,000 |
$136,500 |
If the last tax year's income was under the low threshold, the full amount of $1,200 per adult and $500 per qualifying child (any child under the age of 17 as of December 31 of the year for which the return is due, who has not provided more than half of their own expenses and lived with the taxpayer for more than 6 months) applies. For incomes between the low threshold and the high threshold, a pro-rata reduction is made. Above the high threshold, taxpayers could still qualify for a payment if they have children as each eligible child increases the high threshold phase-out by $10,000.
Receiving too much or too little will be remedied on taxpayer’s 2020 tax return
Simply because so many people have a need for the money as soon as possible, Economic Impact Payments are refundable credits which will be calculated on taxpayers’ 2020 tax returns, but which are being paid in advance based upon income reported on the taxpayer’s 2019 (or 2018) tax returns.
Some taxpayers will experience significant shifts in income from year to year especially given the current economic environment. Will they receive the stimulus payment and based on which year’s income? The good news is that taxpayers will be able to “true up” their Economic Stimulus Payment amount at the time of filing their 2020 tax return.
III. Receiving Stimulus Payments
Most eligible US citizen taxpayers will automatically receive their payments including:
- Individuals who filed a federal income tax for 2018 or 2019
- Those receiving Social Security retirement, disability (SSDI), survivor benefits
- Supplemental Security Income (SSI) recipients
- Recipients of Veterans Affairs Compensation and Pension (C&P) benefits
- Individuals who receive Railroad Retirement (RRB) benefits
For those receiving government benefit payments, the form of the stimulus payment will be the same as used for such benefit payments.
For other U.S. citizen taxpayers who have received from the IRS a direct deposit refund or paid tax with their 2018 or 2019 tax return, the IRS will send their stimulus payment to the same bank account provided.
If the IRS does not have the individual taxpayer’s bank account information on file, they will receive a check in the mail at the mailing address on file with the IRS.
To update bank account and/or mailing address
Per IRS guidance, taxpayers may update their bank account and/or mailing address using the “Filer: Get Your Payment” tool on the IRS website (www.irs.gov/coronavirus/economic-impact-payments). However, for those with foreign addresses this is not yet possible. Numerous advocates for taxpayers abroad have been reaching out to the IRS asking that they fix this glitch in their system. However, as of the date this article was submitted, the IRS system is still not accepting foreign addresses, but hopefully it will soon.
IV. Additional Requirements for Non-Filers Eligible for Stimulus Payments
A. For those who are not required to file US tax returns
To receive the stimulus payment those US citizens whose income is below the US tax return filing threshold will need to provide the IRS their information by filing a quick return using the IRS website tool - “Non-Filers: Enter Your Payment Info Here“ at www.irs.gov/coronavirus/economic-impact-payments. The process is simple, and it only takes a few minutes to complete and submit the request for their stimulus payment. Alternatively, they can file their simple tax return through a third-party tax preparer, but this will delay the receipt of the payment.
Important Note: As to the income threshold amounts required to file (or not file) a US tax return, the above IRS website page includes only some tax filing statuses, e.g. not listed is Married Filing Separately with a filing requirement income limit of only $5; for those Self-Employed, just $400 (the complete list can be found in IRS Publication 501 at www.irs.gov/pub/irs-pdf/p501.pdf).
B. For those who have not filed US tax returns
To receive the stimulus payment those otherwise eligible US citizens who in the last years have not filed any required US tax returns will first need to get into compliance. Any recommendation on whether to use a normal submission procedure or the Streamlined Foreign Offshore voluntary disclosure program is beyond the scope of this article.
V. Important IRS Notices
It should be noted that the IRS does not accept any calls nor is it possible to contact the IRS via other methods to inquire about or expedite such stimulus payments.
For security reasons, a letter about the stimulus payment will be posted to each recipient’s last known address within 15 days after the stimulus payment was made. The letter will provide information on how the payment was made and how to report any failure to receive the payment.
Resources:
Direct Links for COVID-19 Tax Information
- For a summary of all criteria, eligibility and FAQs:
www.irs.gov/coronavirus/economic-impact-payment-information-center
- To check a taxpayer’s payment status:
www.irs.gov/coronavirus/economic-impact-payments
- To calculate a taxpayer’s payment amount (Note: Those with a tax status of Married Filing Separately should select “Single”)
www.irs.gov/pub/irs-utl/how_do_I_calculate_my_eip.pdf
Disclaimer: In applying the provisions of this and any other tax article, it is important to understand the impact of applicable tax laws will vary between individual tax filers. Please consult your tax adviser to determine how the tax laws discussed may affect your particular US tax situation.
References:
www.irs.gov/coronavirus/economic-impact-payment-information-center
www.irs.gov/coronavirus/economic-impact-payments
www.irs.gov/pub/irs-utl/how_do_I_calculate_my_eip.pdf
Special thanks goes to Elaine Terlinden for her review, edit, and invaluable feedback on the contents of this article.
