Americans abroad and relief under the CARES Act: How do they get it and how much do they get

The context

Many countries including Canada and the United States have offered monetary relief to help their residents during these difficult times. (In addition to monetary relief, as Virginia La Torre Jeker as reported here and here: the United States has relaxed the deadline for filing 2019 tax returns. Canada has made similar allowances.)

Interestingly, with respect to access to monetary relief:

Canada’s “CERB Benefit” approach appears to be to simply get cash into the hands of affected people. The benefits may or may not be taxable. But, filing a tax return is not a prerequisite to receipt of benefits.

The U.S. “CARES Act” approach appears to use the tax system as the mechanism for delivery of benefits. Early indications suggest that (at least for Americans abroad) filing tax U.S. tax returns will be a necessary condition for the receipt of benefits. Could benefits really be conditional on filing tax returns, when there are so many people who do not meet the threshold for filing U.S. tax returns?

It appears to be much easier to access the relief in Canada than to access the relief in the United States. Additionally, Canadians do NOT need a lawyer or accountant to understand the program. But, that’s an issue for another day …

What about Americans abroad?

Generally, U.S. citizens living outside the United States, who are tax residents of those other countries, should be eligible for the same benefits as their friends and neighbours, in those other countries. After all, they pay their taxes and use government services in the countries where they live. Immigration status is important! Notably Americans abroad who are living in the UK and are NOT permanent residents may not be eligible for relief from the British Government.

Kudos to ACA (American Citizens Abroad) for aggressively illuminating the fact that Americans Abroad are Americans too!

A March 24, 2020 letter from ACA includes:

Tax legislation along the lines of the “Coronavirus Aid, Relief, and Economic Security (CARES) Act” (H.R. 748) must ensure that Americans living and working overseas are treated in the same manner as other taxpayers, and that special issues arising from the fact that they live outside the U.S. are addressed, so as to avoid mistakes and unintended consequences. All too often, as evidenced by the recent Tax Cuts and Jobs Act, consideration has not been given to how changes will affect the community of Americans overseas.

A recent post from Democrats abroad describes the relief as including:

Americans abroad who meet the income eligibility criteria (adjusted gross income under $99,000) are entitled to the Recovery Rebate (up to $1,200 payment plus $500 per child)

Taxpayers who have provided bank account details with their tax filing will likely be receiving payments by direct deposit in the next 2-3 weeks, with others likely receiving checks or debit cards through the post

Treasury has been provided with flexibility in the language of the bill for providing the cash aid to citizens who have not filed tax returns in 2018 or 2019. We will follow this closely.

Individuals with federal student loans automatically have their interest rate set to 0% for 60 days and can request forbearance (a suspension of payments) for 60 days.

Small businesses have been provided with range of supports to enable them to retain their employees and keep paying their salaries and benefits, via an existing SBA loan product whose eligibility criteria have been greatly relaxed. This MAY enable Americans abroad with small businesses to qualify for the support.

As the ACA letter makes clear, U.S. citizens who are tax residents of other countries are also considered to be tax residents of the United States. As a result, they appear to be entitled to receive the “Corona Virus Dividend” from the United States as well. Could it be that U.S. citizenship-based taxation could (in this instance) actually be a benefit to Americans abroad? This issue was recently explored in an insightful post by Helen Burggraf. Ms Burggraf’s post included the following interesting reference to the thoughts of Vancouver resident Suzanne Herman:

In a posting on an American Expatriates Facebook page, along with a link to the ACA’s statement on its website, on Tuesday, Herman wrote: “I would give up any monetary relief to have Residence-Based Taxation, would you?” Within 21 hours, her post had received 55 “thumbs up” emojis from other American expats and 22 comments, all of which echoed her sentiments.

One commentator observed that she was “skeptical that expats would even get these checks”, noting that “stimulus checks were allegedly sent out after both 9/11 and the 2008 recession”, but that she “never saw one” herself.

Another commentator made the point that, faced with the possible need to pay out a significant sum in the form of coronavirus relief payments to 9 million expats, Congress might at last see a reason to grant them the residence-based tax regime these expats have been asking for.

Said this commentator: “Maybe now is the time to make the change – can this actually be used to help achieve ‘revenue neutrality’ and get RBT passed NOW?”

How much relief do Americans abroad receive and how do they receive it?

General Without A Specific Focus on Americans Abroad

A Specific Focus on Americans Abroad

Like all legislation coming from the United States the CARES Act is difficult to understand generally and particularly difficult to understand how it applies to Americans abroad. Borrowing from the insights of others:

Monte Silver – How Americans abroad would receive the relief afforded by the CARES Act:

I encourage you to go directly to the above link, which is likely to be updated, but Monte introduces his analysis with:

As a public service, I reviewed the final law that was finalized yesterday. I clarify the following:

1. The cash available under the law is NOT an advance. It need not be repaid in any case. Rather, the taxpayer is considered to have made a tax payment in the amount due him/her, and this fictitious payment is refunded to him. So if you owe no US taxes in 2019, you get a “refund” for the money that you are considered to have paid. If you owe US taxes, you get a credit in the amount of the cash due you under the stimulus law.

Again, here is the link for possible updates:

Dr. Karen Alpert – How relief under the CARES Act is determined

Note that relief under the CARES Act (for at least Americans abroad), appears to be available only to those who file U.S. tax returns!

John Richardson – Follow me on Twitter @Expatriationlaw

Leave a Reply