With stimulus payments starting to go out this week, the IRS has launched an online tool allowing Americans who don’t need to file a US tax return to provide their bank details and so receive their stimulus payment more quickly.
The tool was set up in partnership with the Free File Alliance, and is based on the Free File tax filing software.
The tool allows the estimated 10 million Americans who don’t meet minimum tax filing income thresholds to provide a US bank account to the IRS and so receive their stimulus payments sooner. Another tool is launching this week for those who do file a tax return.
Stimulus payments were announced on 27th March as part of the CARES (Coronavirus, Aid, Relief and Economic Security) Act to provide assistance to Americans, including expats, who are financially affected by the Coronavirus pandemic.
The payments are referred to in the Act as Recovery Rebates, and subsequently by the IRS as Economic Impact Payments.
They are calculated based on Americans’ adjusted gross income as reported on their most recent US tax return (i.e. their 2019 Form 1040 if they’ve filed it yet, or otherwise their 2018 Form 1040).
The payments are worth $1,200 for individual filers earning up to $75,000 ($2,400 for married couples filing jointly earning up to $150,000), plus $500 for every dependent child under the age of 17. Above these income thresholds the payment amount gradually phases out.
“The second new tool, Get My Payment, will provide payment updates, including the date your payment is scheduled to be deposited into your bank account or mailed.” – TaxGirl, Forbes
To qualify, expats need to have a US social security number, and be up to date with their US tax filing.
The new IRS tool is exclusively for use by expats in one of the following three categories:
– those whose total worldwide income in 2018 and 2019 was less than the minimum filing thresholds. These were $12,000 per individual in 2018, and $12,200 in 2019, or self-employment income of just $400. Furthermore, expats should be aware that the filing threshold for individuals who checked ‘married filing separately’ in these years to keep their foreign spouse outside of the US tax system was just $5.
– recipients of veterans disability compensation or survivor benefits who didn’t file a 2018 or 2019 tax return.
– Social Security, SSDI, and Railroad Retirement recipients with qualifying dependents. Social Security, SSDI, and Railroad Retirement recipients who don’t have qualifying dependents (i.e. dependent children under the age of 17 with US social security numbers) don’t have to provide their bank details, as they will receive their stimulus payment automatically.
The tool is very simple to use, and doesn’t create any new tax liability; it is so simple to use in fact that some commentators have flagged that there is the risk of scammers and fraudsters stealing payments. To mitigate this risk, expats who fall into one of the above groups should input their details as soon as possible.
No other expats should use the tool though. This is very important – read on to find out why.
The IRS is launching another tool this week (by April 17th) called Get My Payment for Americans who have filed 2018 or 2019 tax returns but didn’t provide US bank details on them to allow them to do so. This second tool will also allow Americans to check on the status of their payment (e.g. when it was deposited). Expats who don’t enter their details into the tool will be mailed a check to the address on their most recent tax return.
Neither tool should be used by expats whose global income was more than the US filing thresholds in 2018 and 2019 but who haven’t filed either tax return yet.
Neither should expats who are behind with their US tax filing suddenly just file a 2019 tax return to receive a stimulus payment.
Either of these actions could leave them open to steep filing and reporting penalties relating to previous missed years.
Instead, expats who are behind with their US tax filing should seek advice from a US expat tax specialist about the amnesty programs available, such as the Streamlined Procedure.
Using the right amnesty program based on their circumstances will allow these expats to catch up without facing penalties or, for most expats, back tax bills, while also allowing them to receive a stimulus payment.