The US government is paying millions of dollars into the bank accounts of American expats as coronavirus economic impact payments and this guide will help you decide if you qualify for the cash aid.
The money is part of the 2020 Coronavirus Aid, Relief and Economic Security (CARES) Act passed by Congress on March 27.
The law says every American – including expats and resident aliens – can have the money automatically paid into their bank, providing they pass some straightforward financial and residence tests.
Below, the step-by-step explanation of the tests to help anyone unsure of their US expat status to decide if they should receive the coronavirus economic impact payment.
How Do Expats Know If They Qualify For An Economic Impact Payment?
Expats who have filed a tax return for 2018 or 2019 can go to the US Internal Revenue Service (IRS) web site and use the ‘Get My Payment’ tool to check their economic impact payment status.
The payment does not depend on where an expat lives outside the US. Wherever an expat lives, the stimulus payment is worked out on the level of their ‘adjusted gross income’ (AGI).
That includes expats living in the US Territories of Puerto Rico, the US Virgin Islands, American Samoa, Guam, and the Northern Mariana Islands.
But many expats could miss out on the payment because they do not make a tax filing.
The IRS says this happens because they are under the mistaken impression that they do not need to file a return if they have no tax to declare.
But expats must make a tax filing with a Form 2555 even if they have no tax to pay.
The filing gives the IRS and Treasury the information needed to work out an expat’s AGI, level of economic impact payment and where to make the payment.
The filing also registers an expat with the IRS for the Foreign Earnings Income Exemption (FEIE) which reduces the level income tax starts by up to $105,900.
The IRS says it is not too late to make a filing for 2018 or 2019 to qualify for the stimulus payment although some interest and tax penalties may apply.
And it is worth making the filing as the Treasury has confirmed nearly 600,000 expats had an economic impact payment cheque for an average $1,641.
Foreign Earned Income Exemption confuses expats
How the Foreign Earned Income Exemption (FEIE) interacts with the stimulus payment is confusing for some high-earning expats.
The highest payment – $1,200 – goes to expats earning up to $75,000 a year.
The payment tapers by $5 for every $100 earned above $75,000, to zero for an AGI of $99,000.
But the IRS has not clarified if the AGI calculation for expats includes FEIE.
FEIE lets expats deduct the first $105,900 of earnings on a tax filing to avoid paying tax twice on the same income.
If the CARES calculation allows FEIE, then expats can qualify for the largest economic impact payment on an income of up to $180,900, which would then taper to zero at $204,900.
The confusion arises because the IRS calculates the AGI for an expat including FEIE on tac filings.
Calculating foreign earned income
Expats can work out their foreign earned income by totting up any money coming in from outside the USA from salaries, wages, commission, any bonus payments, professional fees, and tips.
Exclude interest, dividends, alimony, winnings from gambling, social security payments or pensions.
Claiming your economic impact payment as a non-filer
Some expats may not file regular tax returns, but they can still make a claim for the economic impact payment check online with a free IRS Non-Filers Tool.
The tool allows low-earning expats to qualify for the payment by certifying their incomes.
Economic Impact Payments For US Expats FAQ
Here are some answers to common questions American expats are asking about the economic impact payments made under the 2020 Coronavirus Aid, Relief and Economic Security (CARES) Act.
The full economic impact payment goes to expats with an ‘adjusted gross income’ (AGI) of up to $75,000 or $150,000 for married couples. Expats with an AGI between $75,000 and $99,000 ($150,000 and $198,000 for couples) will see their economic impact payment taper away by $5 for every $100 they earn over $75,000.
Adults pick up a maximum $1,200 each, while their dependent children with US social security numbers up to 17 y ears old receive $500 for each child.
No. The economic impact payments are unearned income.
The US Treasury pays the money directly into a US bank account if the taxpayer has noted the details on their 2018 or 2019 tax return. If bank details are not known, the Treasury sends a check to the taxpayer.
The economic impact payment is based on an average gross income reported in the 2018 or 2019 tax return. If expats who have not filed a tax return will not receive a stimulus payment. It is possible to file late returns with the IRS.