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Coronavirus Aid Relief and Economic Security Act (CARES) for US expats

by James McEvoy, Partner and Philippe Dewez, CPA and Partner, US Tax Abroad

Many US citizens residing abroad wish to know if they will qualify for the benefits contained in the Coronavirus Aid Relief and Economic Security Act (CARES) which was signed into law on March 27, 2020.

It is well beyond the scope of this article to analyze all the provisions of that piece of legislation. However, a few popular elements may be of interest to expats around the world. Let us start by saying that CARES contains many tax provisions designed to help US citizens through these difficult times. For example, there is a postponement of the filing deadline from April 15 to July 15, 2020. This applies to US citizen residing abroad whose normal deadline is June 15. Expats also benefit from a postponement of the first and second quarter estimated payments from April 15 and June 15, respectively, to July 15.

Another popular item is the Recovery Rebate Check (“Economic Impact Payment”) of $1,200 per adult and $500 for dependent children under the age of 17. Expats qualify for this benefit provided their income does not exceed $75,000 ($150,000 for a married couple). Beyond that level of income, the amount of the benefit is phased out and completely disappears for individuals whose income exceeds $99,000 ($198,000 for a married couple). In other words, a family of four US citizens residing abroad with two children under the age of 17 and whose income does not exceed $150,000 will qualify for a $3,400 benefit ($1,200 X 2 for the parents and $500 x 2 for the children). The IRS will take into consideration the income reported on the 2019 income tax return if it has already been filed or on the 2018 return if the 2019 has not yet been filed. Expats face however a specific challenge in collecting that benefit. The IRS will use the direct deposit information that was provided with the last filed tax returns to pay the amount taxpayers qualify for.

However, many expats no longer have an account in the US or never transmitted that information because they did not have refunds on their income tax returns. In the absence of a bank account, the IRS will send checks to the last address on record. This will take more time for American residing in the US and with international mail disruptions may take much longer for expats. It is thus strongly recommended for expats to provide the IRS with their US bank account information by visiting the IRS website https://www.irs.gov/coronavirus/get-my-payment. Those who do not have an account in the US will have to be patient and face fees for cashing in the check at their foreign financial institution or open one.

There are other tax provisions that might be of interest for individual expat taxpayers. Those experiencing financial difficulties as a result of the pandemic are now allowed to withdraw up to $100,000 from their qualified retirement plan without incurring the normal 10% early withdrawal penalty. The withdrawal will not be subject to income tax if the funds are replaced within three years. For those who will not replace those funds, they can be ratably included in income over a three-year period. A special $300 deduction for qualified charitable contributions is also allowed for those who do not itemize. The Net Operating Loss deduction has also been expanded.

About the author

James McEvoy and Philippe Dewez, CPA, are partners with the firm US Tax Abroad SPRL/BVBA, which has been an AmCham Belgium member since 2002.  James serves on the Legal & Taxation Committee.  The firm helps individual and corporate clients deal with US tax planning matters and tax filing requirements.

Contact James at james@crossborderplanning.net if you have any questions about this blog post or require further information.

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