Coronavirus and US Expat Tax Filing in 2020 – Your Questions Answered
Coronavirus, or COVID-19 to give it its official name, is an infectious illness that originated in China in late 2019 and has since spread across the world, causing widespread disruption.
As governments struggle to contain and mitigate for the outbreak, we look at what coronavirus means for US expats filing taxes in 2020.
1 – Expats still have to file
US expats with global income over $12,200 in 2019, or just $400 of self-employment income, are still expected to file a US tax return.
This is because the US taxes based on citizenship rather than on residence.
Many expats also have to file foreign taxes in their country of residence too, however the IRS offers a number of exclusions and credits to ensure that expats don’t pay tax on the same income twice. Expats must claim the most beneficial provision for their circumstances when they file.
Expats with foreign registered businesses or bank or investment accounts are required to report them too.
2 – Tax payments can be deferred
On March 11th, President Trump announced: “I will be instructing the Treasury Department to defer tax payments without interest or penalties for certain individuals and businesses negatively impacted. This action will provide more than $200 billion of additional liquidity to the economy.”
“Increasingly, taxpayers and tax professionals believe that there may be an extension of the tax filing season due to concerns about COVID-19.” – Forbes
On March 17th this was confirmed, with the Treasury Secretary announcing that all tax payments, including social security taxes and estimated payments, can be deferred for 90 days (so until July 15th) this year without incurring penalties or interest.
On March 21st, the government went further and declared that the tax filing deadline has been moved to July 15th too. US expats normally receive an automatic filing extension until June 15th, so this gives them an extra month. The new extension is applied automatically, and is available for anyone who owes up to $1m of income (or social security) tax.
Expats who require more time to file can still request an additional extension to October 15th by filing IRS Form 4868.
The IRS has set up a coronavirus information page, so expats can check in for the latest news and guidance.
3 – Expats filing state taxes may get an extension
While the federal government is yet to announce its full set of coronavirus fiscal measures, some states have taken matters into their own hands.
Expats who retain ties in the state where they last lived may still have to file state taxes from abroad. The rules vary from state to state, and expats should always check to ensure that they are fulfulling any state requirements that they may be liable to.
For example, California has announced an extension for filers affected until June 15th, Maryland and Washington have extended business filing, and Ohio, Pennsylvania and Georgia are closing tax drop-in centers. Doubtless more states will announce similar measures in the days and weeks to come.
4. Expats are eligible for the CARES Act Recovery Rebate
Under the CARES (Coronavirus Aid, Relief and Economic Security) Act passed on March 27th, expats who have a gross adjusted income of up to $75,000 are eligible to receive $1,200 ($2,400 for a married couple filing jointly), plus $500 plus dependent child under age 17. To qualify, expats have to have a US social security number and have filed their US taxes. More details here.
5 – Travel and work may be affected
Expats should note that many countries around the world are imposing travel restrictions, both domestically and internationally, to slow the spread of COVID-19. The US has banned non-US citizens who have been in Europe in the last 14 days from entering the US, and US citizens entering the States may have to undergo screening or quarantine to ensure that they are not infected. As such we recommend that expats check current restrictions carefully before making travel plans.
Furthermore, many countries are asking their employees to work from home, which may affect expats, in terms of their own jobs as well as the services that they use.
6 – Reach out
As a 100% online remote working firm, Bright!Tax is unaffected and ready to keep helping expats file throughout the crisis.
Despite the possible US filing extension, it’s always worth getting tax filing out of the way as soon as possible, and we recommend that expats get in touch so we can help them not just stay compliant but file in the most tax efficient way possible too.