New Stimulus Bill Enacted
With the 2020 year coming to a close, President Trump signed the latest massive U.S. government stimulus bill, which includes a second round of stimulus payments for Americans, including citizens living abroad.
In this blog, we review the highlights of the new stimulus payments, including amounts, eligibility, and timing of the payments.
New Stimulus Payments
The stimulus payment is $600 per person, half the size of the $1,200 payments sent out earlier this year.
The eligibility formula to receive the money is more restrictive than the first round. The payments are phased out completely for individuals who earn more than $87,000 and couples who earn more than $174,000. For the first round of payments, individuals who earned less than $99,000 were eligible to receive the money, while couples who earned less than $198,000 would receive a payment.
However, dependents under the age of 17 are eligible for up to $600 payments, which is more than the $500 limit in the first round.
Importantly for many expats, the new bill also includes a provision, which is seemingly retroactive to the first round of payments under the CARES Act, that expands payment eligibility to U.S. citizens who are married to foreign persons who do not have Social Security numbers.
Timing of the Payments
The official starting payment date announced by the government was January 4, although some taxpayers may have received payments earlier via direct deposit.
The IRS has updated its Get My Payment page to include the second stimulus payment, so you can check the website to receive information about your payment, including the amount you can expect to receive.
Filing Your 2020 Tax Return to Get Your Payment
Similar to the first round of stimulus payments, the tax mechanism for this payment is as follows: You are in fact being provided a refundable tax credit on your 2020 U.S. income tax return, and such refundable tax credit is being reduced by an advance payment (the stimulus payment) to you, which is based on your 2019 tax profile.
Since, as explained above, the stimulus payment is in fact an advance payment against your 2020 tax refundable credit amount, the amount you’re entitled to, after all is said and done, is based on your 2020 tax information, not your 2019 information. This means that if your 2020 circumstances are such that you are entitled to more than your stimulus payment that is based on your previous circumstances, you will be able to claim the balance of the credit when filing your 2020 tax return.
The same is true if you received no payment but are eligible based on your 2020 information. Filing your 2020 tax return will signal to the IRS to provide you a refund in the amount that is owed to you.