Tag Archives: CARES Act

US citizens living in Canada will NOT pay US tax on $1200 US Cares Act payment but likely will pay US tax on Canada’s CERB Payment

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Prologue – The Only Certainties Are Death And Taxes

The above tweet references an article in the Globe and Mail on May 7, 2020. The article contains interesting perspectives, but much has changed since that time.

COVID-19 and the role of government assistance

Both the US $1200 payments under the CARES Act and Canada’s CERB payments were designed to fulfill the same purpose. Specifically, that purpose was to get relief money into the hands of individuals who were suffering from the the COVID-19 pandemic. It appears that payments were made generously with few qualifications for receipt of payments. The qualification appears to have been that an individual was a tax resident of the country. The $1200 CARES Act payment and the CERB payment were to fulfill the same function. Therefore, it would seem logical that both the CERB and CARES Act payment should be taxable in each country or neither payment should be taxable in the country. But, different characterizations of the payments appear to lead to different results.

First let’s review what we do know.

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

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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 …
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