Category 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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CARES Act Relief: How US citizen taxation leads to sending relief money to individuals outside the United States and denies relief money to individuals inside the United States

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Introduction

This post is based on my Quora answer to the question: “Do you agree with the policy of not issuing checks to US citizens who jointly file taxes with someone who has an ITIN?”

Part I – Objective Analysis

This post focuses on the class of individuals entitled to relief. It does not discuss how the relief is administered.

The statute authorizing the relief is found in Section 6428 or Subtitle F (the Procedure And Administration section of the Internal Revenue Code). The following sections specify WHO is entitled to the relief:

§6428. 2020 Recovery rebates for individuals

(d) Eligible individual

For purposes of this section, the term “eligible individual” means any individual other than-

(1) any nonresident alien individual,

…

(g) Identification number requirement

(1) In general

No credit shall be allowed under subsection (a) to an eligible individual who does not include on the return of tax for the taxable year-

(A) such individual’s valid identification number,

(B) in the case of a joint return, the valid identification number of such individual’s spouse, and

(C) in the case of any qualifying child taken into account under subsection (a)(2), the valid identification number of such qualifying child.

(2) Valid identification number

(A) In general

For purposes of paragraph (1), the term “valid identification number” means a social security number (as such term is defined in section 24(h)(7)).

(B) Adoption taxpayer identification number

For purposes of paragraph (1)(C), in the case of a qualifying child who is adopted or placed for adoption, the term “valid identification number” shall include the adoption taxpayer identification number of such child.

In summary this means that:

Those who are conditionally entitled to relief include, ANY individual except a nonresident alien, provided that they:

– have a Social Security Number (who is eligible for a Social Security Number?); and

– do NOT file jointly with an individual who does not have a Social Security Number

Who is a “nonresident alien” and therefore NOT an “eligible individual”?

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Comprehensive analysis of the CARES ACT From Professor Francine Lipman – @narfnampil

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I received the following from Professor Francine Lipman who is on the faculty of the UNLV School of law. It seems to me to be an extremely comprehensive statement of how the CARES Act operates to provide funds to Americans in need.

I highly recommend that you access her scholarship.

With her permission, I have simply reproduced her email as the post.

________________________________________________________________________________________

Dear Passion Warriors for Justice:

I hope this is helpful to you and your colleagues. Stay strong and put your oxygen mask on first. We need your strength, stamina & resilience today and all days on the frontlines of justice. Feel free to contact me at Francine.lipman@unlv.edu for any reason or no reason at all. We are stronger together and I am sending you positive energy! We will get through this and be even more fierce, fearless and appreciative of community, fellowship and face to face conferences! @narfnapil on Twitter

The CARES Act was just signed into law, including a number of individual income tax provisions.

Here are some details on the Recovery Rebate Tax Credit:

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