Coronavirus & U.S. Expat Taxes in 2020/2021
Coronavirus turned our world upside-down, and the effects will last long past the end of 2020. As a result, your 2020 U.S. expat taxes will be a little different than years past because of all the COVID-19 programs, relief options, and requirement waivers for certain tax benefits.
Trying to understand how the Coronavirus affects your 2020 expat taxes is a tough order for even seasoned expats, so you probably have a few questions you need cleared up. Below we’ve outlined some major changes you should know about in order to reduce the stress of the 2021 tax season.
Ready to file your 2020 expat taxes? We can help.
How Coronavirus travel restrictions affect your U.S. expat taxes
If you’re an expat whose time abroad was disrupted by Coronavirus, you still may qualify to claim the Foreign Earned Income Exclusion and housing exclusion when you file your 2020 taxes in 2021.
Normally, you’d have to pass either the Bona Fide Residency Test or the Physical Presence Test in order to claim the FEIE. However, if you failed to qualify due to travel restrictions from Coronavirus, you’re in luck — the IRS waived the time requirements for the FEIE and foreign housing exclusion.
You qualify for the FEIE COVID-19 relief if:
- You were required to leave China, Hong Kong, or Macau between December 1, 2019, and July 15, 2020, or
- You were living abroad in another country and were required to leave between February 1, 2020, and July 15, 2020
How the Coronavirus stimulus checks (Economic Impact Payments) affect your U.S. expat tax return
To provide relief to U.S. citizens affected by Coronavirus, the U.S. government passed three rounds of stimulus checks and legislation.
It’s important to note that many expats still have not received the first or second checks due to mail unreliability. If that’s you, skip ahead to the "Missing Payment" section.
Ready to file? Get started with an Expat Tax Advisor now.
Recap of first, second, and third stimulus payments for U.S. citizens abroad
The first round of stimulus payments included up to a $1,200 payment to each qualified individual as well as up to $500 for certain dependents. They were rolled out over the summer of 2020, and as of December 1, 2020, most Americans abroad had already received their first stimulus check.
The second round of stimulus payments included up to a $600 payment to each eligible individual and $600 per qualifying child, based on your adjusted gross income. For expats to qualify for the full second stimulus check, you must have had $75,000 or less in adjusted gross income (AGI) if you file as single, $112,500 or less if you file as head of household, or $150,000 or less if you file jointly with your spouse or as a qualifying widow(er). You’ll also then qualify for a $600 payment per qualifying child. So, if you filed jointly with your spouse, have two children under age 17, and earn under the income threshold, you’re theoretically eligible for up to $2,400.
The third round of stimulus payments include up to $1,400 payments to each eligible person ($2,800 for married couples filing jointly), plus $1,400 per dependent, including dependents over 17. These payments are technically an advance payment of a 2021 tax credit. While the lower income thresholds to get the full $1,400 are the same as the second stimulus check, if your income is above the threshold, the credit phases out much faster:
The credit phases out for taxpayers with adjusted gross income (AGI) between:
- Single - $75,000 and $80,000
- MFJ - $150,000 and $160,000
- HOH - $112,500 and $120,000
If your income is above the upper thresholds for your filing status, you won’t receive an advance payment.
The biggest differences between the American Rescue Plan Act (ARPA) stimulus checks and the other two stimulus payments are the addition of payments for dependents of all ages and the income phase-out levels.
You can estimate your own payment amount with H&R Block's Stimulus Check Calculator.
Eligibility for the stimulus check has been a big topic of discussion and the source of much confusion. If you are a U.S. citizen or resident with a Social Security number, cannot be claimed as a dependent by someone else, and you fall within the income brackets, you qualified for the stimulus checks.
If you haven’t filed a tax return for 2019 or 2020 and do not receive Social Security benefits, railroad benefits, Supplemental Security Income (SSI) benefits, or veteran’s benefits through the government, you may need to take action and file a 2020 tax return to get your payment or to claim the RRC for the first two payments, if you didn’t receive enough.
If you’re a U.S. expat and still haven’t received your stimulus checks:
Before doing anything, check the status of your third payment with the IRS' "Get My Payment" tool.
If you are an American living overseas and were supposed to get the first two stimulus payments but haven’t yet, there could be a few reasons:
- You didn’t have a U.S. bank on file for direct deposit and your check was mailed
- You had the wrong bank account on file
- You've moved to a different address than the one on file with the IRS
- You owe child support. If you're overdue on child support payments, the IRS said it would deduct them from your first stimulus check amount
Stimulus payment missing or destroyed and you live overseas? You can have the IRS trace it.
Many U.S. citizens and Green Card holders abroad have had the same problem with the stimulus checks — they were mailed but never received. In this situation you can ask the IRS to trace each check and, if those checks have not been cashed and the trace is processed before you file, you’ll be able to treat them as unpaid for purposes of claiming the Recovery Rebate Credit on your 2020 tax return.
The IRS won’t process a trace until:
- 4 weeks since the payment was mailed by check to a standard address for the first stimulus payment; after February 24, 2021 for the second payment
- 6 weeks since the payment was mailed, and you have a forwarding address on file with the local post office for the first EIP; March 10, 2021 for the second EIP
- 9 weeks since the payment was mailed, and you have a foreign address for the first EIP; March 31, 2021 for the second EIP
While the IRS will not be able to provide traces for the second payments until the beginning of April, we can still work with you to get the process started now. A word of warning — if you experienced a pay hike in 2020, your payment will be based off your higher income.
To file the trace yourself, you must mail or fax a completed Form 3911, Taxpayer Statement Regarding Refund, to the IRS. You can find detailed instructions on how to do this yourself on the IRS website, and you must follow them exactly. Currently, the IRS is estimating traces to take about six weeks, but processing may be delayed due to staffing shortages.
Because the process is highly detailed and a bit convoluted, we can help you out and file the trace for you as a $75 add-on to your expat tax filing. Get started with an Expat Tax Advisor now.
Claiming the Recovery Rebate Credit in lieu of missing stimulus payments for Americans abroad
You may still be able to receive a 2020 tax credit (known as a Recovery Rebate Credit) for the first or second stimulus payment, even if you received both stimulus payments, if you qualify for a larger amount based on your 2020 circumstances.
For example, if you have a non-resident alien spouse with no Social Security Number or if you didn’t receive a child payment, you can still rectify the situation and claim the credit when you file your 2020 Form 1040 or 1040-SR.
Line 30 on your 2020 return is the most important line on that form if you want to take advantage of the Recovery Rebate Credit. If you do not fill out Line 30, you will not get the credit. Of course, you don’t need to worry about this when you leave it to one of our trusted Expat Tax Advisors.
If you got an IRS letter, "Notice 1444 Your Economic Impact Payment," save it — you'll need the amount of the payment in the letter when you file.
If you didn’t receive the full amount of the third payment you were owed (due to a new baby, lower income, etc.), there are two times when you may receive additional stimulus money:
- With a "top-up" payment later this year — if your third stimulus was based on your 2019 return and the 2020 return you file would qualify you for more money, the IRS will re-determine your eligibility and issue you an additional payment for the difference later this summer.
- Recovery Rebate Credit next tax year — if you had a change in circumstances in 2021 that would qualify you to receive additional third stimulus money, you can claim a Recovery Rebate Credit when you file your 2021 taxes (in 2022).
American Rescue Plan Act and the child tax credit expansion for U.S. citizens abroad
In the American Rescue Plan Act signed into law in March 2021 was a provision to enhance the child tax credit for the year of 2021.
Unfortunately, most U.S. expats will not qualify for this refundable child tax credit option. You only qualify for the refundable child tax credit option if you’ve had a primary U.S. abode for at least half the year. Here are a couple examples of when you may and wouldn’t qualify:
- If you and your family returned to the U.S. before June 2020 because of COVID-19 and have remained in the U.S. since with no intention of moving back abroad in 2021, you might be able to qualify for the refundable child tax credit.
- If you and your family returned to the U.S. in 2020 because of COVID-19 and have since moved back abroad with no intention of returning to the U.S., you would not qualify for the refundable tax credit.
- If you and your family remained abroad through the pandemic, you would not qualify for the refundable child tax credit.
However, if you may still qualify for the regular child tax credit for U.S. citizens abroad and benefit from some of the enhanced version — you might get a child tax credit of up to $3,000 for a child age 6 to 17 and up to $3,600 for a child age 0-5.
Need help navigating Coronavirus tax implications for U.S. citizens abroad? Ready to start your 2020 U.S. expat taxes? H&R Block is here to help.
The year 2020 was full of pivots, tax changes, and uncertainty; and that’s why the experts here at H&R Block have been working tirelessly to make sure we’re ready to help with your specific tax situation. There’s a lot to digest, so if you’re confused about your COVID-19 tax situation, let us handle your expat tax filing for you.
Whether you file expat taxes yourself with our online DIY expat tax service designed specifically for U.S. citizens abroad or file with an advisor, H&R Block is here to help. Head on over to our Ways to File page to choose your journey and get started.