COVID-19 update:

Our offices are closed but most of our team are available to help you and your business. Free access to information that we have established for our own business or clients.

Tax

$1,200 stimulus payment to Americans living overseas

Many US citizens and Green Card holders living overseas are entitled to a stimulus payment of $1,200. Find out whether you are eligible and how you make your claim.

US Congress Approve CARES Act

What happens if you are a US filer?

On March 27, 2020, US Congress approved the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in order to provide additional financial assistance to individuals during this difficult period.

Under the CARES Act, a qualifying US citizen or Green Card Holder who lives outside of the U.S. will be entitled to a stimulus payment of $1,200 ($2,400 for a married joint couple), plus $500 for each qualifying dependent reported on their last filed Form 1040. An individual taxpayer abroad who had gross adjusted income of up to $75,000 will be entitled to the amount of $1,200 ($2,400 for married couples with a gross adjusted income up to $150,000). This amount will begin to phase out for higher-income individuals earning between $75,000 to $98,000.

To receive the stimulus payment, the taxpayer(s) must have:

 ·        Social Security Number (SSN); and

 ·        Filed either a 2018 or 2019 Federal Tax return – Form 1040.

The IRS will determine whether the taxpayer qualifies to receive the stimulus payment by reviewing the taxpayer(s) last filed tax return. For taxpayer(s) whom qualify, the US treasury will automatically issue a direct deposit payment to a US bank account which may have been reported on the filed 2018 or 2019 Form 1040. For a taxpayer(s) whom the IRS do not hold US bank account details, they will issue a cheque payment via mail to the address on the last tax return filed. At present there is nothing that individuals need to do to secure this payment.

Claiming the payment when you are not a filer

The IRS have released an online registration tool for individuals who qualify for the $1,200 payment, but who are not required to file US tax returns. For more background to the Economic Impact payment please see our earlier article here.

It is unlikely that this tool will be useful for most of our clients, who will in general be people who DO need to file a tax return for one of the 2018 or 2019 calendar years and so will receive their payment via a different route. However, you should consider whether you have any family members who qualify for this non-filer route, in particular adult children in full-time education who are self-supporting (meet the majority of their own living expenses) through summer jobs and student loans.

To recap, to qualify for the payment you must:

  •  Be a US citizen, green card holder or resident alien
  • Have a valid US Social Security Number
  • Have adjusted gross income below the relevant thresholds ($99,000 if single or married filing separately, $198,000 if married filing jointly)
  • You must not be claimable as a dependent on another’s tax return (regardless of whether you were in fact so claimed – see “Am I claimable as a dependent?” below)

To register for the payment using this online tool for non-filers, you must:

  • Meet all of the above eligibility criteria
  • In addition, you were not required to file a 2018 or 2019 US tax return, and did not choose to file voluntarily

In particular, you would have a US Federal filing requirement if your worldwide income exceeded the following thresholds for the year:

 

2018

2019

Single

$12,000

$12,200

Married filing Jointly

$24,000

$24,400

Married filing Separately

$          5

$          5

Individuals who have already filed their 2018 or 2019 US return should automatically receive the payment if they qualify. We expect most of our clients to qualify based on their 2018 filing with no further action required.

It has been announced that there will be a payment mechanism for qualifying individuals who have not yet filed for 2018 or 2019, but who do have a filing requirement so cannot use this online tool. This would apply to individuals who are in the process of completing a catch-up exercise to file back years returns, for example. The details of this mechanism have not yet been announced, but we will be following developments closely and will keep you informed.

The link for the online IRS tool is here: https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here.

Am I claimable as a dependent?
This will be a key question for adult children who are still students, but do not yet meet the US tax filing requirements, as if they are not claimable as a dependent then they may be eligible for this payment through the above form.

A dependent would usually be a child under the age of 19, a student in full time education under the age of 24 or a disabled child of any age if totally and permanently disabled. The child must not provide more than 50% of their own support (living expenses) for the year. Other relatives may also be dependents if you provide more than 50% of their living expenses, and their total income is less than $4,200.

The full rules on who can be claimed as a dependent can be found here: https://www.irs.gov/publications/p501#en_US_2019_publink1000196863.

WARNING: there are numerous scams in both the UK and the US where fraudsters are requesting bank details on the pretence of registering for government payments. To make sure you are using a legitimate service, you should only follow links directly from the IRS website, https://www.irs.gov/. The IRS will not call, text you, email you or contact you on social media asking for personal or bank account information – even related to the economic impact payments. Also, watch out for emails with attachments or links claiming to have special information about economic impact payments or refunds.