Category Archives: Married filing separately

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

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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#YouCantMakeThisUp! Married Americans abroad are more likely to meet requirements to file US tax returns than are singles – But, then again marriage to a nonresident alien is considered to be a form of tax evasion

Before moving to the post, if you believe that Americans abroad are being treated unjustly by the United States Government: Join me on May 17, 2019 for a discussion of U.S. “citizenship-based taxation” as follows:


You are invited to submit your questions in advance.
And now, back to our regularly scheduled programming.
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I begin with the conclusion …


The Every Day facts:


1. A U.S. citizen living in Canada Is married to an alien (the nonresident type)
2. Had $500 of part time employment income
3. Because she is married (in accordance with the definition of “married” in Internal Revenue Code 7703) she is of course required to absorb all the punitive consequences of the “married filing separately” filing category. The “married filing separately category” is a punitive filing category which is a “hidden tax on Americans abroad“.
In the 2017 tax (and previous) year she had NOT met the filing threshold required to file a U.S. tax return. Using the IRS Interactive “Do I Have To File A Tax Return” tool, we find that:

(Note that this refers to a threshold of $4050 which is the amount of the personal exemption for 2017. The significance of this will be further explained below.)
She did however have financial assets which exceeded the $200,000 threshold required to file Form 8938. Most of these assets were owned jointly with her nonresident alien husband. Because she had not met the filing threshold for “married filing separately” in 2017 and previous years she had not been required to file Form 8938. Notice that Form 8938 does require her to report to the IRS assets that are jointly owned with her “nonresident alien” husband. (By the way he would not be happy about this. I some cases this forces Americans abroad to choose between their U.S. citizenship and their marriage.)
April 2019 – An SOS …
I received a frantic message. She was/is trying to to determine whether she is required to file a U.S. tax return for the 2018 year (based on her $500 of income and her status as “married filing separately”).
On the one hand she is directed by IRS publication 54 (the Bible For Americans Abroad) that her filing threshold is $12,000.


On the other hand, she is being told on the IRS page describing filing thresholds that she is required to file a U.S. tax return.


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