Updated April 21, 2020
On March 27, 2020, the US government approved over $2 trillion in economic relief. This stimulus package, known as the Coronavirus Aid, Relief, and Economic Security (CARES) Act, includes stimulus checks to US taxpayers. The details of those payments and how expats can receive them has caused much confusion.
While the bill has passed, the situation is still developing. The IRS has begun answering questions, however, much still remains to be confirmed.
Below are the details on CARES and the recovery checks so far:
1. Are US expats eligible for the stimulus check?
U.S. citizens living abroad can receive a check as long as they are not claimed as dependent on someone else’s tax return, filed a federal tax return in 2018 or 2019, and meet the income requirements for the check (see below).
Non-filers, meaning people who didn’t file a tax return because their income was below filing thresholds in 2018 and 2019, can also be eligible for the stimulus check.
In addition, every person that claims the credit must have a Social Security number – an ITIN is not sufficient.
It is still unclear if US green card holders living outside of the United States qualify.
Non-resident aliens do not qualify for this tax relief.
2. How big is my stimulus check?
How much money one gets under the CARES Act depends on the filing status and Adjusted Gross Income (AGI). AGI is calculated as gross income minus deductions.
The IRS will base the check amount on your most recent tax return, either for the 2018 or 2019 tax year. If you have not filed a tax return for 2018, you should file for 2019 to receive the stimulus.
Qualifying adults can receive up to $1,200, plus $500 for each qualifying child, age 17 or younger. Married couples filing jointly can receive up to $2,400. At higher incomes, the stimulus amount is reduced and eventually completely phased out.
Individuals in these categories are eligible to receive the stimulus check full amount.
|Single||$75,000 or less|
|Married Filing Jointly||$150,000 or less|
|Head of Household||$112,500 or less|
Individuals in these categories will receive reduced payments. The government will not distribute checks above the upper limits:
|Single||Between $75,000 and $99,000|
|Married Filing Jointly||Between $150,000 and $198,000|
|Head of Household||$112,500 and $136,500|
3. How does the Foreign Earned Income Exclusion (FEIE) affect the stimulus check?
One concern for expats is how deductions and exclusions affect AGI. Someone whose income exceeds the CARES Act threshold, but who excluded a large part of their income, could theoretically qualify for relief payment.
For example, a single filer who made $130,000 in 2019 could exclude $105,900 with the Foreign Earned Income Exclusion. This leaves the filer with an AGI of $24,100, which would make them eligible for the full check amount.
However, it is unclear how the IRS will handle such cases, or whether action will be taken to eliminate this. It is possible the IRS may release further clarification that changes this.
4. How and when can expats receive the payment?
The IRS sends payment automatically via direct deposit to bank accounts. There is no need to apply. The distribution of payments has already begun.
The IRS will use the bank account listed on federal returns from 2018, or 2019 if it has already been submitted. If you did not provide bank info to the IRS before, you can submit it on the IRS Get My Payment page. However, the page has not been working well for many people, including expats. Many receive an error message saying “status unknown” or other errors. You can find some troubleshooting help here.
Non-filers can provide their payment info to the IRS on this page.
5. How do I claim the relief amount for my children?
If you didn’t claim your US children as dependents on your last two tax returns, you might still be able to claim a check for them. It may depend on the reason you didn’t declare. Please contact our team for further advice based on your specific situation.
Please note that dependent children who are in higher education are not eligible for checks.
6. What else do I need to know about the CARES Act?
This check is not a gift or free money from the government. Instead, it is a rebate. You can look at it as an interest-free advance for your 2020 tax liability.
If you end up making over the income limit in 2020, then supposedly you will not need to pay the stimulus back, however, this is still unclear. If you were over the limit in 2018 & 2019 but under it in 2020, then you will receive the stimulus when you file your 2020 return.
The rebate is not taxable income.
In addition to the tax relief, payments related to federal student loans are suspended until September 30, 2020. Likewise, during this period no interest will accrue. Contact your loan provider to confirm that your loan qualifies.
The CARES ACT also includes a relief for small businesses. We report on that in a separate article.
Further updates expected
Analysis of the CARES Act and further details from the IRS are still evolving. As additional information and instructions are confirmed our team is working to keep you updated and informed. We also recommend reading our article on the COVID-19 IRS extensions.
Stay safe and please reach out to our team if you have any questions.